2 — QNB ALAHLI Annual Report 2020 Overview
QNB ALAHLI truly believes that Innovation Report Strategic is the key to acheive its vision to become the First Choice Bank in Egypt through driving greater value and ensuring that its business is ready for the future. Performance Operational Read more about our Strategy on page 12
Contents Corporate Social Social Corporate Responsibility Overview 4 QNB ALAHLI Chairman and Assets Net profit Managing Director’s Statement 6 Board of Directors EGP 290,163 m EGP 7,492 m Strategic Report 10 QNB ALAHLI at a glance Risk Management Risk 12 QNB ALAHLI’s Strategy Earnings Per and Governance 16 Delivering sustainable results share Corporate 18 Creating and delivering value EGP 3,08 Operational Performance 22 Wholesale and Commercial Read more in our Financial statements banking section on page 44 23 Retail banking Separate Financial Separate 25 Small and Medium Enterprises Statements
Corporate Social Responsibility 28 QNB ALAHLI’s corporate social responsibility
Corporate Governance and Risk Management 32 Corporate Governance Consolidated Statements
38 Internal Audit Financial 40 Compliance 42 Risk Management
Financial Statements 44 Separate Financial Statements 114 Consolidated Financial Branches Network Branches Statements 188 QNB ALAHLI’s Branches Network
QNB ALAHLI Annual Report 2020 — 3 QNB ALAHLI The financial results and achievements, affirms Chairman & Managing our ability to work and make a difference under Director’s Statement any circumstances, relying on the bank’s strong financial position, our employees’ dedication and the business continuity plan throughout 2020.
Last year was an exceptional year on different levels, as we witnessed one of the greatest challenges to face humankind for decades, namely the global outbreak of COVID-19. However, with every new challenge, QNB ALAHLI proves its ability, to not only withstand and cope with the harshest changes, but to also reaffirm its ingenuity in transforming challenges into opportunities, and crises into rewarding gifts to foster growth, progress, and undeniable achievements. We have reaffirmed these values since the beginning of the COVID-19 crisis. Our tangible achievements were the outcome of the tireless efforts of the Board of Directors and all employees of QNB ALAHLI. I would like to take this opportunity to express my sincere gratitude and appreciation for the valuable contributions of our board and every team member this particular year, the year of the toughest challenges, brilliant opportunities and important milestones. The financial results, achievements, key figures and relevant indicators that are included in this report underscore, once again, our ability to work and make a difference under any circumstances, relying on the bank’s strong financial position, our employees’ dedication in delivering our strategy, and the business continuity plan we put into action throughout the year. Mr. Mohamed Osman El-Dib > Chairman & Managing Director Despite the negative impact of COVID-19 courses, and provided plastic shields for catered to the needs of different market on all economic activities in Egypt and the windows to prevent direct contact segments, and provided unique electronic entire world: the lockdown measures, the between employees and customers. and digital services. slowdown of global trade and the setback To ensure adequate distance between As for the financial results, our standalone of various activities, QNB ALAHLI’s employees, we divided staff presence as net profit amounted to EGP 7,399 million, financial indicators were positive even much as possible in accordance with the while consolidated net profit reached EGP under the exceptional operations CBE directives and Ministry of Health and 7,492 million. The total balance of loan necessary to weather the adverse events in line with international guidelines. In portfolio reached EGP 174 billion, with an related to the global crisis. addition, we applied disinfection protocols annual growth rate of 7%, while the throughout the day. Dealing with COVID-19 crisis bank’s market share of total loans reached professionally For customer safety, we reduced the 7.47%. Credit facilities granted to SMEs number of customers inside branches by reached 22.5% of the total credit facilities Since the outbreak of COVID-19 in Egypt 50%, provided disinfectant to customers, and exceeded the targeted percentage set in March 2020, QNB ALAHLI has applied and asked customers to wear masks inside by the CBE in 2019. Customers’ deposits strict precautionary measures obligated branches. The bank also launched a “Your reached EGP 234 billion with an annual by the Central Bank of Egypt to combat place….Your safety” initiative, growth rate of 12%. the virus spread. Our crisis management encouraging customers to use electronic committee was in permanent session to In addition, we have the highest deposit payment options as a safe alternative to utilization rate, with a loan-to-deposit ratio assess and monitor the situation on a daily cash payment. basis, while taking necessary measures to of 74%, compared to prevailing rate of the ensure safety and health of the bank’s Outstanding financial results sector of just 46%. We focus on the growth teams and customers alike. The of key banking operations and maintain QNB ALAHLI was able to maintain high liquidity for all currencies, and our committee aimed to achieve two key positive financial indicators in 2020 goals: to support the safety and health of total assets reached EGP 290 billion with a despite the challenging economic growth rate of 6% year-on-year. employees and customers, and to help environment domestically and globally ensure hassle-free business continuity in due to COVID-19. The positive results The bank aligns with the government’s all branches and business units. demonstrate the resilience and flexibility efforts to transform to cashless society To achieve these goals, we allowed of our policies and procedures to upgrade and introduce innovative banking employees at greater risk to work from operations and mitigate the negative services home, while encouraging employees who repercussions of COVID-19. In addition, The Egyptian government, through CBE were travelling abroad to self-isolate. At we withstood fierce competition, took and other entities, aims to shift to a the same time, we restricted in-office advantage of emerging opportunities cashless society and support electronic visitors, suspended in-person training through our 231 branches across Egypt, payments all over Egypt. These efforts
4 — QNB ALAHLI Annual Report 2020 were received positively by the banking be scanned by the customer, then they and providing the best medical services. sector, which aims to align with the enter the required amount and pay We also participated in the Decent Life governmental initiatives in this regard. instantly through an e-wallet or via Initiative under the patronage of the Overview QNB ALAHLI was one of the leading banks the VISA SCAN TO PAY app without President of the Arab Republic of Egypt, to to launch state-of-the-art digital products cards or POS machines. Electronic support groups and families in need, and services to cater to the needs of our payment products and solutions come aiming to improve the housing customer base, while coping with the as a part of the initiatives of the environment for the most deserving directives of the government to achieve Central Bank of Egypt to transform families in the villages targeted by the digital transformation. Egypt into a cashless society, which is initiative. The strategic project for digital a strategic goal that QNB ALAHLI Prestigious international and regional transformation in electronic payments is seeks to achieve through its innovative Strategic Report Strategic one of the most important guarantees of services and products. awards Confirming our leading position in strengthening governance and best Supporting SMEs ... engines of providing the best service to customers in utilization of resources, as it effectively development in Egypt contributes to automating public services the banking sector, QNB ALAHLI won a provided to citizens, facilitating access to In order to support small and medium total of 15 prestigious awards this year them with their actual value without any enterprises (SMEs) which are from leading international banking additional burdens, and consolidating the considered engines of development in institutions and magazine. The bank was foundations of transparency and equal Egypt, QNB ALAHLI launched an recognized for its products and services opportunities among citizens. The integrated program that not only provided to its customers, including Best Government has already allocated 12.7 provides banking services to this SME Bank - Egypt, Best Retail Bank in
sector, but also provides it with Performance billion in the current fiscal year for the Egypt, and Best Digital Banking Products Operational gradual transformation into digital Egypt advisory services. We inaugurated two and Services - Egypt business development service centers and the promotion of electronic collection For the second year in a row, we earned two to support emerging, small and of governmental services as an alternative awards from EMEA Finance magazine for medium enterprises and provide to the typical ways of payment. the Best Green Finance Bank-Pan Africa business advice. We also sponsored the and the Best Foreign Bank in Egypt. QNB The outbreak of COVID-19 has doubled the innovation incubator as a part of the ALAHLI is the first bank in Egypt to importance of electronic payment and Nilepreuneur’s initiative under the participate in facilitating green economy collection in light of the precautionary auspices of the Central Bank of Egypt, measures, and the Ministry of Finance is financing, a financing program launched
and in partnership with Nile Social Corporate
by the European Bank for Reconstruction Responsibility cooperating with the banking sector to University, to raise awareness of and Development. allow the payment of governmental dues in creative design in various projects. administrative offices through QR Code, In addition, QNB ALAHLI Life Insurance electronic wallets in mobile phones, in Supporting real estate financing Company was awarded the most addition to ATM cards, Automated payroll initiatives innovative insurance product for the year cards, prepaid cards and credit cards linked During the year, we renewed our 2020 for its product (Breast Cancer to bank accounts. cooperation protocol with the Social Insurance) by International Finance Aligning with the above initiatives and Housing and Mortgage Finance Fund magazine. governmental directives, QNB ALAHLI is a by EGP 3 billion. The renewal of this
Acknowledgment Management Risk leading bank in introducing the latest protocol is based on the success of the and Governance two previous phases, which were Finally, I would like to extend my sincere products and solutions that cater to Corporate different requirements and needs for limited to low-income segments and appreciation and gratitude to QNB individual and corporate customers, provided financing loans to more than ALAHLI’s customers for their valuable including but not limited to internet 5,000 Social Housing Fund clients, trust. On behalf of the Board of Directors, I banking, digital wallets and POS. through which the bank contributed would like to thank all of QNB ALAHLI’s staff for your collective efforts which The fin-tech industry is experiencing EGP 538 million to the support of real contributed to sustainable growth unprecedented development as electronic estate financing sector. especially given the exceptional payments are recognized as perfect Key social initiatives for the circumstances we faced in 2020. You proved alternative to conventional cash payments. Financial Separate development of Egyptian society your ability to work and achieve success In collaboration with Visa, QNB ALAHLI Our Corporate Social Responsibility under all circumstances and challenges. I Statements launched two new services in 2020, the report for 2020 includes many social wish you continued success in 2021. wearable payment wristband and Scan to and humanitarian achievements that Pay, which enables merchant’s payment accompanied the business Our Future Aspirations acceptance through mobiles and via QR achievements of the bank. QNB Competitive pressures represent a daily Code. ALAHLI participated in many projects challenge for QNB ALAHLI. However, the The wearable payment wristband is one of that aim to support the most efficiency of our strategy, our ability to the most advanced, fast and safe means of underprivileged sectors of society to adapt to market challenges, the awareness payment in the world, which is widely fulfil our community obligations in we showed during the pandemic, and our accepted, especially among young people, various fields throughout Egypt. commitment to providing the best services Consolidated as technology represents a major part of and solutions for customers has allowed us Statements During 2020, QNB ALAHLI continued Financial their lifestyle and daily activities. We are to affirm its position as one of the to seize opportunities that arise from the proud to be the first bank to launch this largest entities in the banking sector in challenges. This is in addition to product in the Egyptian market. The terms of supporting Egyptian society enhancing our wide range of services and wearable payment wristband depends on in facing the impact of the pandemic. products. the technology of contactless payments to The bank participated in The Egyptian We will continue to implement all enable the wristband wearer to pay for his/ Banks Initiative launched by the precautionary measures to protect our her purchases in any store or service outlet Federation of Egyptian Banks in employees and customers from the risks of using electronic points of sale that read the coordination with the Central Bank of COVID-19, while providing the best Network Branches wristband data remotely. Egypt to support the economy and innovative digital banking services and As for the PAYnGO service, it is part of the those affected due to the crisis. In the products in line with the needs and integrated solutions package provided by field of medical care, the bank donated requirements of our customers. Seeking to the bank to companies of all sizes under the many medical devices to hospitals, fulfill QNB group vision to be one of the umbrella of supply chain finance programs prepared and equipped rooms that leading banks in the Middle East, Africa, with easy terms and competitive prices. provide free services to patients with and South and East Asia by the end of PAYnGO requires the merchant’s QR Code to the aim of eliminating waiting lists 2021, and a global bank by 2030.
QNB ALAHLI Annual Report 2020 — 5 Board of Directors
6 — QNB ALAHLI Annual Report 2020 Mr. Mohamed Osman El-Dib Overview > Chairman & Managing Director Strategic Report Strategic
Mr. Ali Rashid AlMohannadi Ms. Heba Ali Al-Tamimi > Vice Chairman Non-Executive > Non-Executive Board Member Performance Operational
Mr. Tarek Fayed Mr. Adel Ali Al-Malki > Executive Board Member > Non-Executive Board Member Corporate Social Social Corporate Responsibility
Ms. Shaikha Salem Abdulla Mr. Abdulla Nasser Salem Al-Dosari Al-Khalifa
> Non-Executive Board Member > Non-Executive Board Member Management Risk Governance and and Governance Corporate Corporate
Khaled Ahmed Khalifa Al-Sada Nedhal Shafi Hassan Al-Nuaimir Financial Separate > Non-Executive Board Member Non-Executive Board Member Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 7 Strategic Report
8 — QNB ALAHLI Annual Report 2020 Overview Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 9 QNB ALAHLI QNB ALAHLI succeeded to maintain its status as at a glance a strong player in the Egyptian market. This has come as a result of its strategy to remain a committed business partner to its clients during all times.
Our Heritage
QNB ALAHLI is one of the leading financial institutions in Egypt which was established in April 1978. The bank is ranked as the second largest private bank in Egypt. Retail Banking: SME’s Banking: QNB Group acquired 94.967% of QNB ALAHLI which included the QNB ALAHLI has managed to QNB ALAHLI has capitalized on its full stake of Société Générale – capitalize on its leading position as a trust in the power of SMEs to push France amounting to 77.17 % pioneer in developing and growth and deliver sustained along with free float shareholders. industrializing a world-class retail development, perhaps just as banking service, where QNB importantly manages to support its ALAHLI adopted a unique market SME customers through the peaks of segmentation approach to be able to the economic cycle. structure products and solutions that meet the requirements of each segment.
Awards
QNB ALAHLI pioneering role has been affirmed by winning 15 awards throughout the year 2020 from esteemed international financial institutions such as > Global Banking & Finance Corporate and Our Subsidiaries: Review Investment The Bank established a number of > International Finance subsidiaries in specialized fields Magazine Banking: such as: QNB ALAHLI provides dedicated – QNB ALAHLI Leasing > Capital Finance products in corporate banking, International Magazine financial advisory, project financing, – QNB ALAHLI Life Insurance > EMEA Finance structured financing, trade – QNB ALAHLI Factoring financing, cash management, and > European Bank for foreign exchange with its reconstruction and competitive offerings, it has development |(EBRD) managed to establish a strong bond with its various corporate clientele whether large domestic corporations, subsidiaries of multinational companies, medium caps, as well as SMEs.
10 — QNB ALAHLI Annual Report 2020 Consolidated Corporate Separate Financial Consolidated Operational Corporate Social Separate Financial Financial Overview Strategic Report Governance and Branches Network Overview Performance Responsibility Statements StatementsFinancial Performance Responsibility Risk Management Statements Statements 11 11 QNBQNB ALAHLI ALAHLI Annual Annual Report Report 2020 2020 — — organizations in various initiatives and projects aimed at supporting the in society. sectors neediest Since the beginning of Covid 19 outbreak in Egypt in March 2020, Various measures have been taken accross business boundaries and internal work environment, the Central Bank of Egypt had taken several measurements to mitigate the Corona virus impact on the Egyptian economy. QNB ALAHLI has chosen to be proactive by conducting a timely and efficient approach of reaching out to its customers conveying to them the full support of the bank and facilitating to them the implementation of the CBE guidelines in a suitable and convenient manner that suits the specific conditions and requirements of each of them. QNB ALAHLI has become the vehicle of choice for multilateral financiers to distribute credit amongst small businesses & companies in addition to help shape and implement women in programs.business TheBank serves more than 1.24 million clients through 6700 banking professionals. The bank vision is to keep close to its clients through offering a wide range of products serving almost every financial need of corporates, medium and small enterprises or individuals. achieve To this vision, our bank expands its network of branches to more than 231 branches covering all governorates. Moreover; the bank keeps enhancing its multi-channels automated tools to reach its clients through a network that reaches more than 611ATMs, in addition to, a dedicated call-canter available 24 hours 7 days a day, a week. QNB ALAHLI pays lots of attention to how it reaches out to its valued clients ensuring the ease and comfort with world-class professionalism, while the bank continues to selectively expand its always- expanding branch network. QNB ALAHLI strives to employ its quality and innovative resources to support the Egyptian Economy and help in its development by always expanding the financial services coverage and financial inclusion. As part of QNB ALAHLI Corporate Social Responsibility, it has cooperated with a number of community
QNB ALAHLI Factoring The company has maintained its market position and outstanding performance, especially with the promising sector of small and medium- sized companies, and the company continues to work to increase the volume of its business, which is balanced and through an ambitious work plan. QNB ALAHLI Life Insurance The company maintained its advanced position in the field of life insurance and continued to increase the volume of its business steadily in addition to providing advanced and modern insurance products and services that meet the needs of the company’s customers. QNB ALAHLI Leasing The company continued its outstanding performance as one of the first companies in this field and the company was able to support its position in the local market by increasing the growth of its business volume and profit rates in addition to assets its of quality high maintaining and it has ambitious plans to expand and increase thevolume of its business and meet the growth of this activity. QNB ALAHLI is an integrated financial group as the bank is interested in supporting its subsidiaries that provide non-banking financial services which meet the needs of a wide segment of its customers CAR (Basel II) 21.92% Earnings Per share EGP 3.08 EGP 7,492 m EGP 7,492 Net profitNet Assets EGP 290,163 m Our Financial Strength Financial Our QNB ALAHLI’s Building on our solid performance, in spite of Strategy a challenging year, we continue to remain one of the best performing and strongest banks in Egypt
As part of QNB Group, we, at QNB ALAHLI, seek to contribute to the group’s aspiration to become a leading bank in MEASEA. Building on our firm success, we are committed to our vision to become the First Choice bank in Egypt. Our strategy for 2021 is guided by three strategic dimensions: drive exponential growth, enhance profitability and transform digital capabilities. Amid a challenging global environment, our customer-centric approach remains the driver in all our endeavors. We continuously enhance our value proposition to cater all clients’ needs and provide the best service at all times and under any circumstances. We remain focused on Small & Medium Enterprises (SMEs), tailoring our products and services to the changing market needs. We capitalize on our multichannel distribution model and continuously enhance our variety of channels to ensure convenience, reach and reliability:
> 230 Branches > Digital Banking
> 600 ATMs > Online on-boarding
> 24/7 Call Center platform
> Direct Banking
Our strategy for 2021 is guided by three strategic dimensions: drive exponential growth, enhance profitability and transform digital capabilities.
12 — QNB ALAHLI Annual Report 2020 Overview Overview Strategic Report Strategic
Strategic Dimensions Measured by our four key performance aspirations:
1. Size: Drive Exponential Growth Faster growth than market peers on assets, loans, and deposits Performance Operational 2. Profitability: Enhance Profitability Achieve Best-in class profitability as measured by Return on Assets & Return on Equity
3. Strength: Transform Digital Capabilities Maintain coverage of more than 100% on an annual basis Corporate Social Social Corporate Responsibility
4. Efficiency: Most cost efficient Bank with best in class Cost/ Income ratio & Best Quality of Assets with low NPL Risk Management Risk Governance and and Governance Corporate Corporate
We recognize innovation as an important element to deliver our aspiration and strategy. Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 13 Strategic Dimension Steps taken and achievements in 2020 2021 strategic initiatives
Drive Exponential Growth
Significantly grow SMEs & Corporate Loans & Deposits Grew SMEs share in Bank’s portfolio Continue to grow SME & MVSE business Portfolio & tackle untapped segments to enhance ROE
Diversified presence in untapped geographic locations via Capitalize on the merchant acquiring business to grow the availing POS machines across the Nation, in accordance SME & MVSE portfolio with the CBE direction
Grow profitability and contribution of the Micro& Very Maintained close monitoring of all credit cycles to ensure Increase POS Penetration via driving usage of POS/MPOS small Enterprises efficiency and convenience for clients Machines
Increased returns from existing Large Corporate clients Continue to increase Profitability from Corporate clients through creating a systematic joint sales dialogue across via enhancing ROE & wallet share all customers
Actively grow Corporate business Systematically reviewed & upgraded corporate clients Introduce tailored programs for microfinance enterprises where QNB ALAHLI could benefit from greater value Support Project finance Transaction to Network Customers creation
Increase Corporate and Investment Banking (CIBD) profitability via focusing on NBI, ROE & Fee generating business
Focus on growing deposits portfolio Launched a dedicated arm to attract deposits from MVSE, Grow deposits’ portfolio with a special focus on cheap SME & Corporate clients funds
Increase market share via State-owned Infrastructure Explored new sectors which QNB ALAHLI previously Streamline Risk management practices projects , Renewable Energy & Petroleum and undervalued Petrochemical
Elevated Corporate Banking to align different Enterprise Increase market share through State-owned infrastructure markets into a single stream starting from SMEs up to projects, Real-Estate Finance, PPPs, renewable energy Large Corporates’ business sector and Petroleum & Petrochemical sector
Enhance cross-selling of Insurance, Factoring & Leasing products and services to Large corporate customers
Grow export business and study further Trade Finance automation
Enhance First & First Plus Proposition & Offerings Launched a dedicated Cards business model to focus on Increase cards’ acquisition and utilization via capitalizing enhancing the cards value proposition on the new cards’ business model
Design retention plans customized to customer behavior
Increase market share & achieve maximum growth in profitability via increasing cross-selling & penetration rates per product
Leverage on Innovation to develop a competitive edge, Launched the Global Innovation Program Continue to manage QNB ALAHLI’s Domestic and Global achieve a leading position in the marketplace, and Innovation Programs. continuously unlock new value
Implemented Ten 24/7 Lean Innovation Program Launch QNB Beyond: Continue to capitalize on QNB Initiatives ALAHLI’s employees to innovate and disrupt
Continue to incubate and launch Innovation Programs’ projects and initiatives whether sustaining ones or disruptive ones
Transform Digital Capabilities
Launch our Digital-Only Banking Business Model Kicked-off a digital-only bank project in Egypt Launch a state of the art Digital-Only Bank in Egypt
Implement digital transformation initiatives Enhanced existing mobile offering which led customers to Introduce Blockchain for Trade Finance business a high quality experience on the smart phones for all products and services
Enhanced Internet and Mobile Banking services to better Leverage direct/remote channels to gain market share accommodate clients’ needs
Develop innovative products across our global banking multichannel mix
Leverage on QNB ALAHLI’s Tools, Technology & Product Innovation to increase profitability
14 — QNB ALAHLI Annual Report 2020 Strategic Dimension Steps taken and achievements in 2020 2021 strategic initiatives Overview Overview
Enhance Profitability
Increase Customer Acquisition via Capitalized on Direct Banking channels to increase our Continue to increase Customer Acquisition via leveraging leveraging on our Multi-Channel Model customer base our Multi-Channel Model (Contact Center & Direct Banking)
Enhance customer acquisition through our new Direct Augmented digital and remote offerings within our Remain focused on SMEs and Retail Banking leveraging on Banking channel channel mix tools and technology: QR Code, e-Wallets, mVisa, etc
Enhanced customer experience in both physical and Report Strategic remote distribution channels
Enhance ATM Network Enhanced our ATM network to offer a wider range of Expand current ATM network targeting underserved areas services
Achieve 100% cooperation with QNB entities to enhance Enhanced Digital Trade Finance Services (via TRADENET Enrich the role of Global Transaction banking trade flows development)
Boost Efficiency & Sustainability
Review and adjust risk appetite Adapted risk appetite to the global economic environment Establish Risk Awareness and revamp Operational Risk Performance and risk framework (risk-return culture) to ensure bus across QNB ALAHLI Operational
Optimize processes through automation and efficiency Enhanced Straight-Through Processes (STP) across all Continue to enhance processing time for operational increase SMEs Segments via dedicated processing teams activities to deliver enhanced customer experience
Improved productivity via enhancing operational Continue to centralize/automate processes to increase activities processes client-facing time
Improved processing time for top Retail, Corporate, and Integrate a new system for Loan Origination to our Scoring SME activities Models & Workflow system Corporate Social Social Corporate Responsibility Standardized sales tools to improve client-facing time Continue to measure and control performance through KPIs and Scorecards to ensure Business Plan achievement
Leverage on QNB ALAHLI’s Tools & Product Innovations Ensured optimum number of staff is available in branches Ensure business continuity during crisis periods and to improve customer experience in branches provide the required infrastructure and tools for efficient virtual workspace
Monitor SLAs to enhance Customer Experience in branches Developed SLAs across business, support and control Promote branchless and cashless operating model activities in order to ensure productivity Risk Management Risk Governance and and Governance Continue to improve waiting time in branches to improve Corporate Corporate service quality
Enhance SLAs to ensure offering competitive service level
Adopt ESG/Sustainability as a main driver for growth Introduced policies and systems to govern our Integrate Environmental, Social, & Governance “ESG” sustainability practices criteria into our operational framework Separate Financial Separate
Embed sustainability culture into our business Identified Environmental and Social matters that are of Issue the Environmental and Social Risk Management Statements importance to us (ESRM) Policy
Set up a sustainability framework consisting of three Issue the first QNB ALAHLI’s Sustainability report pillars: sustainable finance, sustainable operations, and beyond banking Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 15 Delivering Four key performance aspirations act as the sustainable results building blocks to deliver our strategy
QNB ALAHLI aspires to become We aspire to become the most efficient the best performing bank and bank with lower cost-to-income ratio > 6,500 strongest bank in Egypt in terms and best quality of assets with NPL. Employees of: We constantly work on reducing 1. Size processing time to eliminate waste and We aim to deliver the fastest growth in enhance customer convenience. > 600 the market. We want to grow on assets, Average approval time for retail ATMs loans, and deposits. express loans reached 2 working days; 2. Profitability SME facilities’ follow an approval cycle We aspire to achieve best-in-class less than 15 working days and via Lean profitability; as measured by RoAA & Six Sigma, corporate facilities approval > 230 RoAE. cycle reached less than 25 working Branches days. 3. Efciency We continuously seek to increase 4. Strength efficiency. Through Lean Six Sigma We aim to maintain coverage of more > 2,000 analysis, we aim to eliminate waste in than 100% on an annual basis. Customer Relationship order to render all bank procedures as efficient as possible. Managers > 200,000 Retail Banking SMEs Banking Corporate Banking E-wallet subscribers Enhance value Grow medium and Enrich the role of > 250,000 proposition for very small enter- Global Transaction Internet Banking users affluent market prise segments banking
> 50,000 Expand current increase share of POS Machines Enhance merchant ATM network, wallet and profit- acquiring value targeting un- ability in large cor- proposition tapped areas porates
Offer and promote Increase cards’ Grow export busi- non financial ser- acquisition and ness & expand digi- vices to entrepre- utilization tal offering neurs
Continue to de- Capitalize on di- velop mortgage rect channels to Continue to devel- finance and en- increase customer op project finance riche-banking tools acquisition
Bank Wide • Acquire new deposits to increase deposits market share • Ensure business continuity during crisis mode • Implement a state of the art digital-only bank
16 — QNB ALAHLI Annual Report 2020 Creating and Continuously expanding and enhancing delivering value digital value offering Overview Overview
In the midst of a challenging year, our Our variety of payment acceptance Report Strategic digital products and services have solutions allows our merchant clients allowed us stay reachable and to accept payments in a convenient accessible to all our customers. We manners, offering their customers incessantly enhance and develop or cashless and contactless solutions. digital products and services to Visa Scan to Pay (previously m-Visa) accommodate our customers changing service allows customers to enjoy needs. cashless payments and offers a B2B mobile payment service using the QR Amidst the global lockdown, QNB Code technology. QNB ALAHLI Performance ALAHLI offered Ma’ak Online, the Operational PAYnGO, allows merchants to accept online onboarding platform, which payments from their clients through only requires one visit to any branch to smartphones and to follow the sales open the main account. Allowing a and payments instantaneously, practical, safe and secure customer through the application. experience, the electronic tool is the sole platform through which the We successfully deployed more than customer can interact with the bank to 25,000 POS machines with QR and benefit from our saving products, . contactless features, across Egypt, Corporate Social Social Corporate covering underserved areas and Responsibility We continuously expand and enhance capitalizing on our wide multichannel the services available on our Internet model and our experienced relationship and Mobile Banking platforms to managers. ensure convenience and allow our customers to execute transactions Our E-wallet has become an integral remotely. part of our value proposition, offering a wide variety of services to customers QNB ALAHLI was a pioneer in offering and non-customers ensuring contactless and cashless payment
convenience, security and reliability. Management Risk solutions, which allowed our customers and Governance
to perform transactions, safely and Aiming to achieve a leading position in Corporate securely. We were the first bank to the market, we have embarked on a launch the Wearable Payment mission to establish a state of the art wristband, offering the latest tap-and- digital-only bank. pay contactless payment technology. Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 17 Creating and Innovation and creativity are at the core of delivering value QNB ALAHLI’s overall strategy
“We recognize QNB ALAHLI truly believes that Our Innovation Approach Innovation is the key to realizing its We started our Innovation efforts in innovation as an vision to become the First Choice Bank 2005 and we have established an in Egypt through driving greater value innovation process where employees important element and ensuring that its business is ready across QNB ALAHLI can submit ideas to deliver our for the future. to our Innovation Team which are We recognize innovation as an validated, sharpened, and tested for aspiration and important element to deliver our feasibility. The aim of this process is to aspiration and strategy, supported by leverage our pool of employees to strategy.” dedicated resources who are committed generate ideas as we believe that our to unlocking new opportunities, employees are well paced to spot delivering value and expanding the market trends and identify customer Innovation culture and mindset across behaviors. the whole organization. While we seek Innovation Lies at the core of QNB to improve the overall customer ALAHLI’s overall strategy with the experience through the new products belief that Innovation Leads to growth, and services we are capitalizing upon competitive intelligence, and our Innovation Platform to explore new competitive advantage. ways of working.
Creating and delivering value through
Customers Service quality Multichannel presence innovation
QNB ALAHLI Creating and delivering value
Communities Stakeholders Employer of choice Total shareholders Social returns responsibility Profitability and Supporting sustained growth sustainable Risk management development
18 — QNB ALAHLI Annual Report 2020 Creating and Sustainable finance, sustainable operations delivering value and beyond banking constitute QNB Overview Overview ALAHLI’s sustainability/ESG framework
As a leading private bank playing an Our sustainability framework consists Report Strategic “QNB ALAHLI is essential role in the financial sector, of three pillars: sustainable finance, committed to our products and services shall create sustainable operations, and beyond value for our stakeholders. We do this, banking. All three pillars support QNB creating a more by embedding a culture of ALAHLI’s goal of having sustainable sustainability into our business which financial performance along with being sustainable future allows us to support our customers, not a responsible bank. just in the present, but also into the Under each pillar we have identified the for its employees, future. sustainability topics that are relevant Performance customers, and the This includes environmental aspects, to our business, stakeholders, along Operational communities it such as climate change and resource with a series of action plans to improve scarcity; social aspects, such as human our performance. rights, financial inclusion, and data serves.” Following the footsteps of QNB Group privacy. It also includes corporate and paving the way for us to become a governance aspects, such as board signatory to the United Nations Global composition, anti-corruption and Compact (UNGC), which is their first ethical business practices. Collectively, formal public commitment to these ESG (Environmental, Social and
sustainability, we shall be committed Social Corporate Governance) factors shape our Responsibility to imbedding the (UNGC) principles approach and priorities. within our operational framework. Leveraging on this, we have adopted a QNB ALAHLI is committed to creating proactive approach to sustainability a more sustainable future for its which strengthens QNB ALAHLI’s employees, customers, and the business resilience and supports communities it serves. sustainable financial performance. Additionally, this proactive approach
reduces risk, opens new business Management Risk Governance and and Governance opportunities, improves brand value and reputation, provides a platform for Corporate innovation, helps in attracting and retaining diverse staff, achieves sustainable growth, cut costs, and reinforces stakeholders’ relations. Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 19 Operational Performance
20 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 21 WholeSale & A Professional Performance despite Commercial Prevailing Global Challenges Banking
The year 2020 presented unprecedented In addition, the bank played a key role challenges on a global scale due to the in Egypt’s largest issuance in the COVID-19 pandemic and related history of the local corporate bonds. impacts on every facet of life and QNB ALAHLI continued to play a business. strategic role in financing renewable To attempt to mitigate the negative energy developers, and it also led, financial impact of the pandemic in managed, and participated in debt Egypt, the Central Bank of Egypt restructuring transactions with local implemented a variety of measures to banks to ensure business continuity for support the economy socially, many clients. financially, and economically. Regarding Egypt’s promising SME QNB ALAHLI has followed the Central segment, QNB ALAHLI has further Bank of Egypt’s measures in an advanced its successful business model efficient and professional way. by expanding its customer base and increasing its well-managed The bank has been in close contact involvement in diversified business with its corporate and retail clients sectors within the SME market. In with the objective of supporting them addition to providing financing support during this challenging time as well as to the segment, the bank has expanded to assess and manage the increased its non-financial support to SME risks. entrepreneurs as well. Despite the unforeseen circumstances, In recognition of our achievements, the bank maintained its focus on QNB ALAHLI has been granted Best increasing business while maintaining Corporate Bank from Global Banking its leadership position in the Egyptian and Finance Review. market. The bank continued to play a significant role in large-ticket transactions with major corporations and for sizeable projects in sectors such as Food & Beverages, Oil & Gas, and Contracting.
Despite the unforeseen circumstances, the bank maintained its focus on increasing business while maintaining its leadership position in the Egyptian market
22 — QNB ALAHLI Annual Report 2020 Retail banking QNB ALAHLI’s retail banking offers a comprehensive suite of products and Overview services to provide our clients with the full range of opportunities to serve their increasingly sophisticated banking needs.
Based on QNB ALAHLI’s knowledge of QNB ALAHLI launched facility Report Strategic the market needs and mechanisms program with simplified documents for which has been acquired by the bank Freelancers “Value proposition” to fit over its long experience that extends to the specific needs of this segment by more than 40 years of banking offering facilities for untapped experience, through an integrated, customers. extensive multichannel network which Moreover, QNB ALAHLI enhanced its support our sustainable market mortgage facilities by granting position, growth and profitability. mortgage finance loans to middle Performance Targeting being up to date with the income clients, contributing strongly Operational growing market demands and aligning in middle income segments initiative. with financial inclusion initiatives, QNB ALAHLI tailored pensioners QNB ALAHLI enhanced its existing package with various benefits which products and services portfolio to suit this segment needs in addition to further support all segments of society. multiple digital solutions purposing Financial Inclusion minimizing the visits to the branch QNB ALAHLI’s strong slate of financial within “Covid-19 pandemic
precautionary measures”. Social Corporate
inclusion activities in 2020 were Responsibility implemented with special Digital Transformation measurement due to the COVID-19 At QNB ALAHLI, the multi-faceted pandemic. The bank exceled in its digital banking approaches aligns with effort to enhance financial literacy and market needs which differentiates us attract new clients, focusing on among our competitors. Our underserved segments such as females, commitment is to develop innovative minors and senior citizens. digital solutions by introducing QNB ALAHLI launched the female dynamic digital products and services Risk Management Risk value proposition “Laky Package” to with the highest levels of security. and Governance
serve a diversified banking needs of Corporate In addition to continuously enhancing women aligning with Women our diverse range of digital products to Empowerment Initiatives, where the support an ever-improved user bank developed its depositary by experience, we have recently creating an initiative that is considered implemented an “Apply Now” feature the first in the market to allow mothers on our website to allow clients to apply to donate to their children. for loans and credit cards directly, and
easily without the burdensome of Financial Separate visiting the branches. Statements
We believe we have a strong digital strategy, driven by the voice of our customers, which aims to differentiate us from our competitors. Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 23 Retail banking All achievements were a direct result of our Continued strategy to position QNB ALAHLI as the bank of choice for customers.
Being said that, the bank is moving Products and Premium Services QNB ALAHLI’s banking services have forward to enhance our customer QNB First Plus exclusive customer base excelled in the Egyptian market, with more experience by having different and continues to grow based on the bank’s than 229 branches, 550 ATMs and more easy access to our services without the core strength of providing than 190 Cash acceptance ATMs (CDMs) burdensome of visiting branches comprehensive, seamless, high-quality covering nearly all Egyptian governorates through adding some new features; one banking services. and operating in underserviced areas to of the unique examples: support customer growth. In the same context, the bank launched “Ma’ak Online” service, which allows the World Elite MasterCard for UHNW QNB ALAHLI achieved a retail depository clients to open a bank account online First Customers to offer outstanding growth rate of 5.9% and remarkable with zero fees while enjoying a higher purchasing power, top-of-the-line growth of 21% in our retail loan portfolio interest rate, exclusive offers and features and benefits, and exclusive and more than 1.75 million cards. discounts. travel and insurance benefits designed All achievements were a direct result of our The bank added numerous upgrades to for customers who enjoy the finer strategy to position QNB ALAHLI as the its Internet Banking service, providing things in life. bank of choice for customers with more clients with online opportunities to offers than 6,700 banking professionals, excellent redeem their credit card loyalty points, QNB ALAHLI cardholders enjoy customer service and high-quality reissue credit card PIN codes, change year-round card offers, including products and services covering all supplementary cards limits; all installments and discounts across a segments. contributing to a more robust user variety of categories during special experience. events catering to the needs of all In alignment with Central Bank of segments, availing to clients with the Egypt directives to shift towards a most exclusive discounts and cashless society, we enriched our cards installment plans. portfolio by introducing a contactless In recognition of International feature to all of our cards for an easier, Disability Day, QNB ALAHLI launched faster and more secure shopping a special offer for people with experience for every client. disabilities by providing a free first QNB ALAHLI’s client enjoy year bank package. accessibility to new SMS service for all debit transactions, allowing them to receive an instant SMS notifying them of the transaction details. Awards QNB ALAHLI was the first bank in Egypt to launch the Prepaid Wearable Wristband, in collaboration with Visa. In recognition of QNB ALAHLI’s industry excellence, the bank The latest Tap and Pay contactless has been awarded in 2020: payment process which facilitates easier and faster transactions than ever before. • Best Retail Bank – Egypt 2020 The successful implementation of the Capital Finance International magazine bank’s ATM expansion plan has seen further spread of QNB ALAHLI’s services across Egypt. Which comes as • Best e-Banking product – Mobile Banking 2020 a useful solution matching with social International Finance Magazine distancing environment, the bank launched the Drive-Thru ATM. • Best Retail Bank Global Banking & Finance Review
24 — QNB ALAHLI Annual Report 2020 SMEs banking QNB ALAHLI is a leader bank in the field of digitized SME products and services with an Overview extensive slate of offerings
Business Development Service Centers • Cooperation protocol with Credit Report Strategic (BDS Centers) for SMEs to provide Guarantee Company (CGC) QNB ALHLI Awards: non-financial services to this sector. QNB ALAHLI provides a wide range of In addition, QNB ALAHLI has sponsored tailored lending programs covering QNB ALAHLI was recognized as the the Creative Design Incubator hub at Nile working capital, medium-term loans, Best SME Bank in Egypt in 2020 University for five years (covering five unfunded facilities, and trade services from several renowned cycles). The initiative aims to create with a short processing period. These international financial institutions, awareness about the creative industry, its programs include: importance in driving economic growth, including: • Tailored fast lending program Performance and as a source of competitiveness and Operational • Capital Finance International differentiation. The bank is widely • Financing against POS/QR proceeds magazine recognized as the lead bank associated • Tech loans to finance technological with this initiative and has received equipment purchases and the effusive praise from the organizers. • International Finance magazine renovation of technological office QNB ALAHLI increased its market share equipment in the promising SME sector using a • Preapproved lending program for small multi-faceted strategy to increase the • Global Banking and Finance exporters
number of customers, diversify economic Social Corporate magazine Responsibility activities, grow the amount of credit • Supporting agribusiness under the granted and deposits received, and SASME program (joint project co- maintain a very low rate of non- financed by the French Agency for QNB ALAHLI has developed a performing loans. Development and the European Union) comprehensive suite of banking services and in collaboration with the Egyptian QNB ALAHLI has signed crucial specifically designed to meet the needs of Banking Institute (EBI). cooperation protocols to reinforce the SMEs. This promising economic sector banks’ strategic direction with regard to QNB ALAHLI offers a selection of SME contributes to the national economy by SMEs and offer support to industrial and packages that have been strategically creating jobs opportunities that support a Management Risk commercial institutions. The most developed to meet the diverse business and Governance broad sector of society. It also has a notable include: needs of SME and MVSE enterprises. The Corporate crucial impact on the growth of economy bank’s packages provide them with the as a whole as the companies within the • Cooperation protocol for the new best solution to manage their cash flow industry grow and further contribute to leather Manufacturing city in Rubiky including, but not limited to, current the sustainable development of the sector. • Cooperation protocol with the account, POS, cash net, free cheque books, The SME sector offers promising Industrial Development Authority Corporate Payment Services “CPS” and opportunities for the bank to further (IDA) business debit/credit cards. develop its business and increase its • Cooperation protocol with Damietta market share. QNB ALAHLI was, once Financial Separate City for Furniture (DFC) again, a market leader for SMEs applying Statements for credit facilities online. Utilizing • Cooperation protocol with the digital tools which became increasingly Federation of Egyptian Chambers of necessary due to the COVID-19 pandemic Commerce where the bank was able to serve SME • Cooperation protocol with the Micro, clients skillfully while also ensuring a Small and Medium Enterprise safe, physically distanced experience. The Development Agency (MSMEDA) bank will continue integrating several products and services throughout the
coming period as it leads the way in QNB ALAHLI increased its market share in the Consolidated Statements digitizing SME products. promising SME sector using a multi-faceted strategy Financial QNB ALAHLI is a leader bank in the field of digitized SME products and services with an extensive slate of offerings including cash management, trade net services, cash payment services as well as products that facilitate, secure, and increase sales volume such as POS, Network Branches PAYnGO and e-commerce. QNB ALAHLI adopted a dynamic strategic plan to support the development of the SME sector in alignment with the SME initiative launched by the Central Bank of Egypt. The bank established two
QNB ALAHLI Annual Report 2020 — 25 Corporate Social Responsibility
26 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 27 QNB ALAHLI’s Corporate Social Responsibility
We are pleased to present QNB ALAHLI’s In Medical Care Field: In addition, QNB ALAHLI signed a social responsibility report for the year QNB ALAHLI continues to pay special contract with the National Cancer 2020, which carries many social and attention to the health care field, by Institute - Breast Cancer Hospital, for the human achievements that accompanied donating important medical devices to renovation and development of the the business achievements of our bank. hospitals that provide free of charge sterilization unit at the hospital that QNB ALAHLI participated in several services to eliminate waiting lists and to provides free-of charge services to more projects that aim to support the provide the best medical services to the than 250 women per day. unprivileged sector of society, in neediest segments, among these medical fulfillment of its societal obligations in institutions: i.e. Pediatrics Hospital in In Worthwhile Social Causes: various fields allover Egypt. Ain Shams University Hospitals, QNB ALAHLI contributed to many National Institute of Diabetes and development projects for improving the During 2020, QNB ALAHLI’s continued Endocrinology, Kasr El-Aini Center for living conditions of poor families. QNB to affirm its position as one of the largest Nephrology, Dialysis, Transplantation in ALAHLI continued for the second year to entities in the banking sector in Cairo University Hospital, and Josaab participate in the national initiative supporting Egyptian Community to face Foundation for Social Development. “Decent Life” in cooperation with Misr the impact of Covid 19 through El-Kheir Foundation for the housing participation in the initiative launched QNB ALAHLI also participated in the improvement for unprivileged families in by the Federation of Egyptian Banks in establishment of an outpatient room in poor villages targeted by the initiative. coordination with the Central Bank of Magdy Yacoub Heart Foundation The project is implemented in “Al- Egypt “Egyptian Banks initiative” to Hospital that works to change the health Esaweya village” in Sohag Governorate, support the Economy to face the current outcomes of the most vulnerable, which desperately needed health crisis and to support those affected by particularly children, by improving services and housing improvement. The Covid 19. comprehensive, advanced cardiac care project includes 22 houses in urgent need available to all people in need, free of QNB ALAHLI participated also in for roofing, furniture and renovation. In charge. different aspects of social responsibility addition, a medical convoy is provided for activities. the unprivileged people to improve their living conditions and to ensure a decent, risk-free life for the people of the village. On the other hand, QNB ALAHLI also QNB ALAHLI participated in several projects that aim to participated in the project of granting 35 support the unprivileged sector of society, in fulfillment young women small projects that enable of its societal obligations in various fields allover Egypt. them to raise the economic level of their CSR Activities families and reduce the rate of unemployment in Cairo Governorate by enabling them to own micro-income generating projects. In addition, QNB ALAHLI celebrated the Orphan Day by providing donation to one of the charitable institution that support orphans.
12 Projects in the field of Education
12 Projects in the field of Health Care
14 Projects in the field of Social Welfare
28 — QNB ALAHLI Annual Report 2020 Overview
Staff Engagement in CSR activities: Youth development and support: QNB ALAHLI Support for People Report Strategic In alignment with QNB ALAHLI’s strong QNB ALAHLI continues to support youth with special needs: belief to be a genuine contributor to the through the participation in NilePreneur QNB ALAHLI participated in supporting society and to deliver a better business Initiative for the second year under the the first charity Mutual Fund ATAA performance and build a stronger brand, auspices of the Central Bank of Egypt in founded by Naser Social Bank, and partnership with the Nile University by QNB ALAHLI extended its scope of operating under the supervision of the sponsoring one of the incubators activities to onboard QNB ALAHLI Financial Regulatory Authority (FRA) “Creative Incubators “ at Nile University, employees along its journey of for the support of people with special aiming to create awareness about the community support services through needs in education, social and health creative design industry being a Performance their participation in building wooden care and all other channels that cater for Operational competitive advantage in various ceilings for homes of unsheltered people people with special needs to empower projects and its importance in driving to protect them from heat and water and integrate them. economic growth as a source of leakage in the event of rain in Ismailia competitiveness. Governorate and in Behara Governorate in cooperation with Misr El-Kheir On the other hand, QNB ALAHLI Foundation. This greatly created a sense participated in the project of “Training of positive belonging among QNB for Employment”, for raising the ALAHLI employees. technical, professional and managerial Corporate Social Social Corporate skills of 100 women in Cairo Responsibility In Educational Field: Governorate. The training is followed by QNB ALAHLI continues to pay special offering beneficiaries job opportunities attention to the educational field and through the implementation of provides support to students in production lines to manufacture craft Alexandria University who have products within their societies and difficulty to pay their tuition fees due to linking them to the labor market through financial hardship. The bank also Misr El-Kheir Foundation. participated in the development of Risk Management Risk “Al-Shohada Preparatory school for Girls and Governance in Ismailia” in cooperation with Misr El Corporate Kheir Foundation, which provides educational service for about 550 girls in 15 classes that need full maintenance and renovation. In addition, the bank inaugurates the projects of the During 2020, QNB ALAHLI’s continued to affirm its position as one of the largest entities in the banking sector in supporting development of “Al-Nahaya Elementary Egyptian Community to face the impact of Covid-19. School”, in Assiut Governorate, which serves more than 594 students in 12 Financial Separate
classes in the village of Al-Nahaya, and Statements the development of “Bahaa El Din Raslan Elementary School”, Zagazig Center in Sharkia Governorate, which serves more than 400 students and includes 9 classes. In addition, the bank participated in the 2019-2020 students’ graduation of the University of Science and Technology in Zewail City, after offering scholarships
to many of them. Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 29 Corporate Governance and Risk Management
30 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 31 Corporate QNB ALAHLI recognizes the need to adhere Governance to the best practices in Corporate Governance, which is derived from the importance of implementing rational corporate governance policies and procedures.
QNB ALAHLI recognizes the need to shareholders to the General Assembly adhere to the best practices in meetings, in compliance with bank’s Corporate Governance, which is statutes related to laws and regulations derived from the importance organizing the procedures and of implementing rational corporate deadlines for calling the General governance policies and procedures. Assembly and how to manage its meetings, the General Assembly is Corporate Governance is considered by managed in a way that allow all the bank as a core culture, long term shareholders to express their views in vision and strategy, are applied light of what is regulated by the law sustainably and not only in the short and bank’s statutes, according to the term, in order to maximize the value of agenda of the Assembly meeting, the the bank to the shareholders, and Bank is adequately disclosing the maintain the confidence of customers topics that are included in the agenda and investors in addition to preserving of the Assembly meetings which is the rights of all stakeholders, as well as accompanied with the supporting the staff and customers. QNB ALAHLI information that enable shareholders always aspire to maintain the highest to take their decisions properly, the standards of Corporate Governance and bank provide reply to all enquiries publish the results reports accurately raised by the shareholders sent before and transparently in full compliance the meeting to be included in the with all applicable laws, regulations agenda. and controls. And then the Bank discloses the The main pillars of governance: decisions taken by the General Corporate Governance is based on four Assembly in addition to all the main pillars (responsibility, essential events to all that happened accountability, fairness, and and to the public at the same time. transparency). Where the minutes of General Assembly meeting are published on the QNB Al-Ahli is committed to Bank website, the Bank is committed to implementing these pillars through the provide the Central Bank of Egypt and following: financial regulatory authority as well as notify the Egyptian Exchange with Frist Pillar: General Assembly ordinary and extraordinary General of Shareholders Assembly decisions immediately after The General Assembly comprises of all its conclusion at the latest before the shareholders of the bank, in proportion start of the first trading session to the share owned by each following the end of the meeting, shareholder. All shareholders are which guarantee the fair disclosure for entitled to attend the General all crucial information. Assembly meetings, the Bank will facilitate the attendance of
The Current Shareholding Structure of QNB ALAHLI
Owners of 5% or more of the Number of shares as of 31/12/2020 Percentage % bank's capital
Qatar National Bank 2,046,369,862 94.967
Total 2,046,369,862 94.967
32 — QNB ALAHLI Annual Report 2020 Overview
Second Pillar: Board of Directors cumulative voting system must be applied by granting each Report Strategic shareholder a number of votes equal to the number of shares he Composition of the Board of Directors owns so that he can grant them all to one candidate or In accordance with Statutes of the Bank the current distribute them on more than one candidate when electing composition of the board of directors comprises of nine members of the Board of Directors, in a manner that allows members, the bank is managed by a board of directors proportional representation in the membership of the Board of composed of a number of not less than five members selected Directors whenever possible. by the general assembly from among the shareholders, for a period of three years and this does not prejudice the right of the The board of directors shall appoint among its members a legal person who is a member of the board of directors to chairman, a vice-chairman and one or more managing Performance replace whoever represents him in the board from among them. directors, and in the absence of the Chairman and the vice Operational the Board are composed of executive and non-executive Chairman, the eldest member shall chair the board. All Board members to ensure that board decisions are not dominated by a of Directors have the necessary experience and knowledge to specific individual or a small group of individuals, and the perform their duties effectively and efficiently to achieve board of directors must have at least two of the executive bank’s goals, shareholders and customers, members and the majority of the board members must be the Board of Directors have full knowledge of their guiding role non-executives, and it is permissible to include two and their part towards establishing the guidelines of rational experienced members at most to the Board of Directors. corporate governance. When electing members of the Board of Directors, the Corporate Social Social Corporate Responsibility
The following is the composition of the Board of Directors in its current round 2019-2022:
Sr. Name (Executive / Non-Executive) Position
1 Mr. Mohamed Osman Ibrahim EL-Dib Executive Chairman & Managing Director
2 Mr. Ali Rashid Ali Al-Mohannadi Non-executive Vice Chairman
3 Ms. Heba Ali Ghaith Al-Tamimi Non-executive Board Member Risk Management Risk 4 Mr. Tarek Abdel Raouf Magdy Fayed Executive Board Member and Governance Corporate Corporate 5 Mr. Adel Ali Mohamed Al-Malki Non-executive Board Member
6 Mr. Abdullah Nasser Salem Al-Khalifa Non-executive Board Member
7 Ms. Shikha Salem Abdullah Al-Dosari Non-executive Board Member
8 Mr. Khaled Ahmed Khalifa Al-Sada Non-Executive Board Member
9 Mr. Nedhal Shafi Hassan Al-Nuaimi Non-Executive Board Member Separate Financial Separate
Duties & Responsibilities of the effective decision-making and > One of the main authorities of the Statements Board applying rational corporate board is approving business QNB ALAHLI has Effective Board of governance, this includes a clear strategies activities, verifying the Directors, based on the general delineation of the principal, quality and integrity of financial assembly’s assignment, the Board is responsibilities and main control, internal control, in individually and / or collectively authorities of the Board, top addition to assuring the Bank’s responsible for Bank management with management and control functions financial adequacy, Board the optimum methods with the members are fully aware of all the > Approve Bank’s strategic objective of maximizing the value of Bank activities and functions
objectives, policies and plans, Consolidated shareholders’ investments and achieve Statements appoint and replace members of > Carefulness to apply the rational Financial the projected business plan results, the executive management of the corporate governance standards in preserving the rights of customers and bank. accordance with the bank business all stakeholders. The BOD is keen to activities, market place and other achieve all its objectives in full > Set Bank’s values and standards, relevant economic factors compliance with the applicable laws ensure compliance with and regulations. obligations towards shareholders > Establishing a legislative and other related parties framework within the Bank,
Board of Directors duties and particularly about the Network Branches > Ensure that Bank’s compliance responsibilities are defined as organizational structure and with legislations, the Bank’s follows: business activities, including the Statutes and internal regulations, > Ensures that the Bank’s methodology for allocating Human the board is also responsible for organizational structure enables calibers to all divisions and protecting the Bank against illegal the Board of Directors and top departments and inappropriate practices and management to assume their activities responsibilities and facilitates
QNB ALAHLI Annual Report 2020 — 33 Corporate Governance Continued
> Periodic review of arrangements of Egypt for one time during the fiscal Considering the measures taken by the and agreements with external year. also, decisions of the board of Central Bank of Egypt, QNB Al-Ahli is auditors to ensure consistency directors may be taken by circulation in closely monitoring the loan portfolio to with the volume and nature of the case of necessity, provided that all determine the impact of the virus on Bank’s operations members agree to them, on condition various quantitative and qualitative that the decision is approved later in the factors to identify potential increases > Ensure the credibility and first meeting of the board of directors. in credit risks for the entire portfolio in adequacy of financial and its various economic sectors. accounting rules, including those Reports & information submitted to accordingly, the bank continues to take related to the preparation of the Board and its Subcommittees proactive measures and procedures financial reports In addition to reports and documents that it started from the first quarter of > Present the financial reports to provided to the BOD prior to its 2020, including strengthening the shareholders regarding the Bank’s meetings, Board members are provided necessary allocations to mitigate the business and activities with the sufficient information and impact of COVID-19 on the loan documentation at the right time to portfolio, with the possibility of taking > Guarantee correct procedures for enable them performing their duties. other precautionary measures in light disclosure and communication Moreover, committee members receive of the fact that the pandemic has not with shareholders, investors and the relevant information prior to ended yet. The Board sub-committees all other related parties, about the committee meetings for review and of the of Directors are being regularly Bank’s strategy, financial results study, in order to take appropriate updated with the latest Corona virus and significant developments decisions within the various board updates, as well as the precautionary > Provide effective internal control committees. measures taken by the bank. environment to assess and mitigate risks, in addition to Executive Management Third Pillar: Committees creating an appropriate framework While the Board of Directors 1- Board Committees for risk management undertakes absolute responsibility for The Board of Directors has composed a Bank’s governance framework, the > Setting a system to report the number of committees to empower Executive Management is responsible inadequate acts inside the bank to achieving Bank objectives optimally, for day-to-day Bank activities, to the Board of Directors such committees support and assist the insure they are being conducted BOD in the implementation of assigned > Formulate clear, effective and effectively, securely and correctly in responsibilities and duties, these adequate rules to deal with conflict accordance with the Bank’s internal committees were formed in accordance of interest policies, procedures and controls, with Banks corporate governance within the framework of applicable > The Board is keen to ensure that regulations issued by the Central Bank laws & regulations. adequate and timely information is of Egypt in addition to the relevant available to all members of the applicable laws & regulations, paying Proactive and Precautionary Board enabling them to conduct attention to the nature of the Bank’s measures to face the effects of their duties effectively and various activities. Each BOD Coronavirus pandemic (“COVID-19”) efficiently committee comprises of at least three Coronavirus has spread across all members, the committees submit their geographic regions of the world, Convene of Board meetings reports and recommendations causing disruption to commercial and The Board of Directors met 8 times periodically to the Board of Directors economic activities. QNB Al-Ahli is during the year 2020 in the presence for taking the necessary decisions. closely monitoring the situation and presidency of the Chairman and through its business continuity and Each BOD committee has a Terms of Managing Director, as the regulatory emergency plan for dealing with the Reference (ToR) which regulate its controls require that Bank’s Board of repercussions of this virus to ensure objective, scope of responsibilities, Directors meets at least eight times a business continuity while preserving regularity, membership and attendance year, BOD members may participate in the health of Bank employees and quorum. Such ToRs have been approved BOD meetings through (telephone or customers. Also, to limit the spread of by the Board of Directors. Each video conference), in this case their infection, the role of the bank’s Crisis committee reports to the Board of participation is considered an actual and Emergency Management Directors with absolute transparency participation in BOD meetings and they Committee has been activated, which of its performed tasks, findings, are entitled to vote, and their votes are convenes on a permanent basis, to conclusions and recommendations, the calculated in the quorum for the follow developments in the situation, Board of Directors periodically meeting and the validity of the take the necessary decisions and track follow-up the activities of committees decisions taken by the BOD., and it may their implementation through the to verify fulfilling its mandates. The also be held outside the bank’s official various departments, as well as trail on Board committees may assign any of premises inside or outside Egypt on the the implementation of the Central the Bank’s Executive Directors or condition that all board members or Bank’s instructions in this regard. external consultants to perform their representatives approved and Because of the uncertainty caused by specific tasks that help the committee attend, Provided that the meeting of the outbreak of the Coronavirus in conducting its mandated activities. the board is outside the Arab Republic (“COVID-19”). a brief overview of the formation of
34 — QNB ALAHLI Annual Report 2020 Overview
each committee and the number of its 4.1- Compensation & 4.2- Recovery Committee Report Strategic meetings during the year are Clearfield Benefits Committee The committee reviews Bank’s NPL and explained at the annual report and The committee is composed of three portfolio status and its related the Bank’s website. non-executive board members having provisions, reviewing recovery adequate expertise of organizational achievements, discussing prospects of 1.1- Audit & Compliance Committee structure and human resources issues, recovery, forecasting provisions level, The Committee comprises of three the committee meets at least once a the committee meets on a quarterly non-Executive Board members having year and submits its report to the Board basis. adequate expertise in financial, of Directors, the committee is accounting and auditing standards, the responsible for managing human 5.2- Tariffs Committee Performance committee meetings are held at least resources activities, including setting The committee reviews, updates and Operational four times a year and submit its reports the annual budget and reviewing the validates the Bank’s unified tariff, the to the Board of Directors, the annual staff benefits and Committee meets semi-annually. committee has is mainly responsible remunerations. for reviewing the bank financial 6.2- Communication Committee 5.1- Executive Committee (EXCO) statements and ensure the The committee approves the strategic effectiveness of internal control Responsible for implementing the framework and the proposed environment, the committee follows Bank’s strategy and is capable of advertising campaigns, the committee
up the performance of Internal audit steering all the Bank’s business and meets when required at a minimum of Social Corporate Responsibility and compliance departments in activities, in addition to reviewing the twice per year. addition to the external auditors submitted issues by all Bank division mandates. and departments. The Committee is 7.2- FATCA Steering Committee composed of executive members of the The committee ensures 2.1- Risk Committee BOD and the Senior Executive implementation of FATCA and The Committee comprises of at least Management, Committee meetings are compliance with relevant laws and three members of the Board of held as needed. regulations, the committee meets Directors with a majority of non- semi-annually.
executive members, Committee 2. Internal (Management) Management Risk Governance and and Governance meetings are held at least twice a year Committees 8.2- Foreign Exchange Committee and submit its report to the Board of Executive Management has composed (FX) Corporate Directors, the Committee is responsible several specialized management The Committee allocate the foreign for developing and monitoring the committees to support and supervise currency free market resources in Bank’s risk management strategy and the Bank vast activities as follows: compliance with the relevant rules, determine hedge policies for regulations and directives of the protentional risks, It also reviews 1.2- Assets and Liability Central Bank of Egypt, the Committee procedures and overall risk Management Committee (ALCO) meets on a daily basis. management framework, the The committee analyzes and approves Separate Financial Separate committee also define the relevant the impact of the financial 9.2- New Products Committee roles and responsibilities throughout environment and market changes on The Committee validates the Statements the Bank. the Bank’s financial management characteristics of new products or methods with the necessary proposals services or significant changes to 3.1- Corporate Governance & and authorize any changes in applied existing products and services, and Nomination Committee interest rates for several banking make sure that all the risks have been The Committee is composed of three operations, the committee meets at identified, analyzed and accepted, the non-executive members having least twice per each quarter (8 times Committee convened when necessary. adequate expertise in governance’s per year). standard and aware of regulatory 10.2- The new branches committee Consolidated environment, the committee meets 2.2- Risk Review Committee The Committee sets and implements Statements Financial twice a year and submits its report to The committee focus on reviewing Network Capex expansion plan, in the Board of Directors, the committee credit cases proposed by risk division terms of opening new branches, supervises the Bank’s corporate which require revising and taking the expansions, relocation of existing governance practices and ensures that relevant credit decisions, including branches, major/minor renovations, rationale governance’s rules and allocating provisions if needed, reviews rent, renewals, etc., The Committee procedures are effectively applied. The reports of the Bank credit portfolio, the meets on a monthly basis. committee proposes appropriate Committee meets on a monthly basis. changes in corporate governance 11.2- Credit Committees Network Branches policies, in addition to reviewing all 3.2- Operational Risk Committee The committee is responsible for nomination proposals for Board The committee reviews periodically approving credit granting decisions, members or the reformation of the BOD. the changes in operational risk it’s divided into several credit sub- exposure, bank regulatory committees according to type and environment, crisis management and volume of the required credit facilities, business continuity plan, the the committees are convened when Committee meets semi-annually. needed.
QNB ALAHLI Annual Report 2020 — 35 Corporate Governance Continued
12.2- Quality Committees the fund, follow up the duties of the audit department, this position is The committee is responsible for internal auditor of the investment managed by a full-time executive following up the activities of total manager, and assure that all parties director, The Head of Internal Audit quality management and analyzing fulfil their obligations. submits a quarterly report to the Audit customer complaints and the actions and Compliance Committee, present taken to solve and reduce them, as well Fourth Pillar : The Control the internal audit activity during that as studying internal and external Environment period the main findings, and follow up customer satisfaction surveys and the implementation, and the Internal Control System their results and recommendations of commitment of the various sectors of The Bank periodically develops to have total quality management to improve the Bank’s departments and scheduled an effective internal control system, to the level of customer satisfaction in all the implementation ensure having range of policies, rules the activities of the bank, and it also and procedures, which prepared by provides strategic guidance that Risk Management Bank’s regulatory authorities, the guarantees excellence in the services Based on the instructions of the internal control system defines the provided to clients Central Bank of Egypt, the risk competencies of each department or management identifies, analyses, function in order to achieve a complete 13.2- Information Technology measures and monitors various separation between responsibilities Committee protentional risks to recognize the and duties, The internal control system The committee is responsible for reasons and how to hedge and mitigate has been approved by the Board of approving the strategic plans for such risks, ensure the quality and Directors, and the Audit and information technology, directing and effectiveness of risk management Compliance Committee periodically following up the implementation of methods at the bank, and ensuring a evaluates the system and submit its those plans, as well as supervising the robust information management recommendations to the Board of major initiatives / projects in this field, system including early warning Directors in addition to allocating resources and indicators, in addition to ensuring the setting information technology The internal control system is designed extent of acceptable risk appetite for priorities for all the bank’s activities to ensure the accuracy of the the bank with both strategic planning implementation of the internal and capital adequacy management, 14.2- Information Security regulations and the instructions of ensure that adequate capital is in line Committee Qatar National Bank Group, As well as with the level of risk associated with The committee is responsible for the instructions of all concerned the Bank’s activities. approving any initiatives / regulatory authorities, Ensuring the modifications required on the accuracy and quality of information, Compliance Department information security policy, reviewing whether for the internal use of the The Bank is committed to ensure that the bank’s plans related to business Bank or its clients from outside parties all its activities are being conducted in continuity, disaster recovery and and regulatory authorities, and compliance with applicable laws and response to workplace accidents, also protecting the physical assets of the regulations, and relevant laws or revising information security related Bank from the exposed risks, ratifies ethical standards and monitoring events and determines if there are and record those assets at bank records, compliance are the primary adequate controls to prevent their ensure the achievement of the short- responsibilities of the Audit and recurrence term or strategic objectives plans of the Compliance Committee, the Board of bank Directors, the CEO and senior executive 3. Independent committee management directors. accordingly, Internal Audit Department the Bank has an independent Investment Funds Supervisory The bank attaches great importance to Compliance Dept. with the objective of Committee (Protecting Investment The internal audit function consider it identifying, monitoring and evaluating Certificate holders) as an independent and objective any risks arising from non-compliance, It’s an independent committee that is activity, designed to control all supporting the bank with the technical entitled to supervise all the activities activities and support to achieve its opinion and continuous monitoring of of investment funds launched and objectives, through a systematic and compliance risks, provided that the sponsored by QNBAA, the committee structured approach to assess Bank’s compliance officer is technically and comprises of minimum 3 members and methods and systems of internal reportable subordinate to the Audit and maximum 11 members, the majority of control and risk management Compliance Committee, while its members must be independent, the procedures, ensure the corporate administratively reporting to the committee meets at least four times governance rules are applied properly Chairman of the Board of Directors. the during the year. for all departments and operational, Compliance Sector applies an effective The duties and responsibilities of the financial and legal activities, Technical follow-up process to confirm respect committee have been identified by law, subordination to the Audit and with the new supervisory instructions such as appointing the investment Compliance Committee, and and confirm their delivery to the manager, fund admin services administratively subordinate to the related parties, and those responsible company, the custodian and fund’s Chairman of the Board of Directors, for their implementation and inclusion external auditors in addition to within the work procedures, as well as the Bank has an independent internal approving the financial statements of preparing quarterly reports regarding
36 — QNB ALAHLI Annual Report 2020 Overview
the evaluation of the implementation External Auditors Report Strategic of regulations and procedures to the The Bank assigns external auditors Compliance and Review Committee. in who meet the conditions stipulated in addition to continuing to abide by the the Accounting and Auditing law, implementation and updates of the Profession Law, Including competence, FATCA Agreement. reputation and necessary expertise. Their experience, competence and Corporate Governance Department abilities must be corresponding with Corporate Governance Department is the volume and nature of the Bank’s targeting to establish the principles of activity. The External Auditors are Performance rational Bank Corporate Governance, appointed by the General Assembly Operational monitor its implementation and based on the proposal of the Board of evaluate its effectiveness. The role of Directors and after the Corporate governance department is to recommendation of the Audit and identify and demonstrate the rational Compliance Committee. External behavior for the bank management in auditors are fully independent of the accordance with the best international Bank and its Board of Directors, they practices of corporate governance, thus are neither shareholders nor members
achieving a balance between the of the Board, and are not relative to any Social Corporate Responsibility interests of all related parties of Board of Directors, they also do not (Stakeholders) in addition to ensuring permanently engage in any technical, the protection of shareholders’ rights, administrative or advisory tasks. to be fully aware of the significant External auditors are also neutral in information, voting rights and expressing opinions, their assignment participation in the decisions regarding is invulnerable to the intervention of the fundamental changes in the Bank, the Board of Directors. The Bank abides which will have an impact on their to the instructions of the Central Bank
investments. Moreover, to ensure full of Egypt concerning the rotation of Management Risk Governance and and Governance disclosure of all substantial external auditors, moreover, the Bank information and fundamental events is committed to the present external Corporate accurately, equally, transparently and auditor’s report regarding its Corporate on time Governance activities in accordance with the applicable governance and disclosure regulations. Such report is being presented to the General Assembly of shareholders. Separate Financial Separate
QNB ALAHLI recognizes the need to adhere Statements to the best practices in Corporate Governance Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 37 Internal Audit An independent function that provides assurance and consulting services to the BOD to evaluate and improve the effectiveness of governance, risk management, and control processes
Scope and Responsibility of the Professional practices and resources Internal Audit Internal Audit has adopted the Internal Audit helps the BOD and the International Professional Practice Audit & Compliance Committee in Framework (IPPF) of the Institute of effective discharge of their Internal Auditors (IIA) as well as Basel responsibilities to serve the best Committee recommendations and interests of shareholders. other leading standards. Internal Audit is headed by the Chief The Internal Audit team is composed of Internal Auditor, who reports to the individuals with experience from Audit and Compliance Committee leading financial institutions and audit (ACC) of the Board. firms. The Internal Audit team is professionally qualified; undergo For the purpose of fulfilling its role in continuous professional development, its professional capacity, Internal awareness and training. Audit is authorized to have full and unrestricted access to any of the bank’s The Internal Audit maintains a quality records, documentation, systems, assurance and improvement program properties and personnel, including that covers all aspects of the internal Executive Management and the BOD. audit activity to increase the efficiency and effectiveness of the internal audit The Internal Audit charter and policy activity and identifies opportunities have been enhanced to align with the for improvement. Generally, the Basel Committee on Banking Internal Audit conforms with the IIA’s Supervision’s recommended standards International Standards and Code of and the IIA’s International Standards, Ethics, as per the results of external to keep pace with the business quality assessment. expansion of the bank, and to provide adequate oversight of the Bank’s The Internal Audit continues to subsidiaries. develop its data analytics capability and extrapolation techniques to be able Scope and responsibilities of to identify systemic issues and execute Internal Audit includes: efficient audits. – Advisory services, insight, and analysis – Audit programs and techniques – Promoting control awareness and risk culture – Main audit projects and priorities for the upcoming year
The Three Lines of Defense model In line with Basel guidelines, QNB ALAHLI has adopted the “Three Lines of Defense” model.
1- 2- 3- Business Risk and Internal and process control audit functions functions function
1. Business and process functions 2. Risk and control functions 3. Internal audit function Responsible and accountable for (Risk Management, Compliance, legal, Independently assesses the identifying, assessing and controlling Financial and permanent controls) effectiveness of the processes created the risks of their activities. Ensures that the risks in the business in the first and second lines of control. and process units have been Provides assurance on these processes appropriately identified and managed. and value-added recommendations to improve the process and promote best practice.
38 — QNB ALAHLI Annual Report 2020 Overview
Internal audit universe and coverage Promoting transparency Report Strategic All activities of QNB ALAHLI’s Final audit reports incorporating audit branches, departments and issues, management’s action plans and subsidiaries are part of the Internal target dates for implementation, are audit universe. The audit universe is issued to the Management, CEO and carefully monitored and progressively ACC. In addition, a quarterly report refined to consider and reflect QNB summarizing Internal audit activities ALAHLI’s business strategy, growth and outcomes is also issued to, and and emerging risks. discussed with, the ACC and the BOD. Performance The annual audit plan is developed Internal Audit performs timely and Operational using the Risk Based Approach and the appropriate follow-up and valuation of best practices for assessing the risks of all pending and closed audit issues all the QNB ALAHLI’s businesses and including issues reported by the CBE activities. This is supplemented with and the external auditors. additional focus on regulatory Such follow-up activities are facilitated requirements including Basel III capital by the Audit management system. The adequacy and liquidity requirements, periodical status report (Dashboard) on as well as management areas of
the follow-up activities is issued to the Social Corporate concern and emerging risks. Responsibility ACC, CEO and the divisional heads. The The plan is continually reviewed and report also serves as an escalation to adjusted, as necessary through the apprise the Executive Management, year, in response to changes in the ACC and the BOD on the QNB ALAHLI’s business activities, implementation status to remediate operations, systems and controls that pending audit issues which are also change the risk structure of the bank. used as part of the performance indicators for control environment. The presentation to the ACC has been
Continued focus on this has reduced Management Risk refined to focus on critical data and and Governance the number of outstanding high information that would enable Corporate priority issues. effective monitoring and oversight of performance in various activities. The oversight of subsidiaries has been refined, with focused scope and additional emphasis on the Governance, Risk Management and Internal Control structures and Separate Financial Separate frameworks as part of the oversight and assessment process. This enables Statements Internal Audit to align the governance structure and arrangements in the subsidiaries with those of the bank, thereby promoting the achievement of the QNB ALAHLI’s vision and strategy. Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 39 Compliance Independent Compliance division have been set in order to identify, monitor and evaluate any risks of non- Compliance and provide the bank with high level expertise and monitoring of Compliance risks.
QNB ALAHLI is committed to ensure Whistle-blowing, who could blow the that its activities are conducted in whistle, and the channels that could be accordance with applicable banking utilized to whistle-blow, including rules, regulations, related laws and e-mail and the Whistle-blowing ethical and best standards. hot-line. The drafted policies and procedures concerning the same Monitoring Compliance is undertaken govern and guarantee the anonymity by the Compliance division, and is of the reporting staff. monitored by and reported to the Audit & Compliance Committee, that has Combating Financial Crime, Know been delegated by the BOD to monitor Your Customers (KYC) Policy, and Compliance risks. Enhanced Due Diligence: Compliance values: > New High risk /Sensitive Customers criteria added to the policy, which Compliance and adherence with the requires the Compliance Division to code of ethics, and principles such as evaluate and approve the prudence and due care that ensure relationship for acceptance and meeting the leading professional on-boarding. standards and alignment with QNB Group’s vision, mission, and > QNB ALAHLI’s Compliance assesses strategy vis-a-vie: new and existing products and > Not accepting transactions or services from Compliance and AML/ entering into relations that fall CFT perspectives; and updates the outside laws or contrary to Code of bank’s strategy and procedures on an Ethics. ongoing basis to cover Compliance and AML/CFT risks. > Zero tolerance policy with misleading data, products and AML/CFT transactions monitoring: service that non-compliant with laws Combating Money Laundering is and regulations. practiced on both Head Office level & the branches level, due to the > Refusing client relationships where significant volume of banking the bank does not sufficient Know transactions done through QNB Your Customer (KYC) data to meet ALAHLI’s branches or its electronic the requirement of due diligence, and channels, as well as the complexity of enhanced due diligence when some products. required. QNB ALAHLI has an efficient > Whistleblowing project, QNB automated tool for monitoring ALAHLI’s Compliance considers customer transactions that helps to Whistleblowing as a top identify & analyze the unusual responsibility and a key element of patterns / suspicious behaviors among its effective Compliance program, the the customers, in addition to other whistleblowing right is granted to all tools and reporting channels initiated QNB ALAHLI’s employees which for an efficient risk mitigation process. enables them to raise serious concerns when the staff believe - based on good reasons - that a situation has serious concerns when they believe a potential non- compliance incident took place, with valid justification. Whistleblowing Policy and Procedures were prepared in order in order to define
* FATCA : Foreign Account Tax Compliance Act * AML/CFT : Anti Money Laundering and Combating the Financing of Terrorism
40 — QNB ALAHLI Annual Report 2020 Overview
Sanctions and Embargos Policy: Training strategy: Report Strategic Compliance is keen on ensuring that Compliance at QNB ALAHLI adopted the bank copes with internationals Group Compliance’s Training Strategy sanctions and Embargo’s to manage the & Programs for 2021, to ensure the risk of sanctions failure by monitoring spread of a Compliance culture and all payments, transactions and trends awareness of key risks and risk linked to different jurisdictions, mitigation actions. Trainings include ongoing developments and updates on but are not limited to Compliance, sanctions and programs. AML/CFT, Sanctions, Fraud, KYC, special trainings concerning key Performance Ongoing follow up to ensure proper Operational regulatory requirements. implementation of CBE new regulations and international laws: Continuous enhancement for QNB ALAHLI’s Compliance implement Compliance Division: an efficient follow up process to ensure > The Corporate Governance Dept. had new regulatory requirements are recently joined Compliance division communicated to relevant which is considered a step forward to stakeholders, and ensure follow up strengthen the Compliance and completeness of actions taken to governance environment. Corporate Social Social Corporate implement such regulation, Responsibility > The continuous development of furthermore, QNB ALAHLI has started monitoring and reporting tools, to implement onsite Compliance review including the relevant systems and assignments to Provide objective applications to manage Compliance assurance that bank’s activities are and AML/CFT risks. complied with the CBE regulations and Laws. > Professional Certification which is an ongoing educational process to In addition to report an evaluation on ensure the continuous professional
such implementation to the Audit & Management Risk development of Compliance staff and and Governance Compliance Committee on quarterly raise their levels of expertise. Corporate basis. Furthermore, Compliance undertakes continues efforts to ensure the effective implementation of all FATCA requirements and enhance the relevant systems and controls, in addition to providing continuous training to the
concerned stakeholders. Financial Separate Statements Consolidated Statements Financial Branches Network Branches
* FATCA : Foreign Account Tax Compliance Act * AML/CFT : Anti Money Laundering and Combating the Financing of Terrorism
QNB ALAHLI Annual Report 2020 — 41 Risk Management Risk management within QNB ALAHLI is a key focus at all levels of the Bank.
Risk is an integral part of our business Liquidity Risk QNB ALAHLI has a and decision-making process. Risk QNB ALAHLI considers the prudent robust risk management within QNB ALAHLI is a management of liquidity as essential in key focus at all levels of the Bank. ensuring a sustainable and profitable management business and in retaining the Risk works to identify, measure, confidence of the financial markets as monitor, control and manage risk at all governance well as the Central Bank of Egypt. levels and reports to senior structure and management and the board of Ultimate responsibility for structural framework that directors. As a result, we have a robust liquidity management resides with the risk management governance structure local ALCO in accordance with the ensures a crucial and framework that ensures a crucial preapproved policies by the board of balance between risk and reward. directors, with day-to-day balance between management being managed by the QNB ALAHLI’s Risk Appetite treasury. risk and reward. statement articulates the risk culture, governance and boundaries of QNB The risk management oversight ALAHLI. process through representation within the ALCO provide assurance that the The Risk Appetite Statement provides a bank resources are sufficient in amount framework for QNB ALAHLI’s and diversity. This allows for the approach towards risk-taking and is accommodation of planned and reviewed, reassessed and agreed unplanned increases in funding alongside the bank’s strategic and requirements routinely without financial planning process. material adverse impact on earnings or Our risk profile and appetite are on the Bank’s perception in the market. approved by the BOD and the Risk Committee then cascaded to every Stress testing and Internal Capital division, department and employee. Adequacy Assessment (ICAAP) QNB ALAHLI intends to maintain QNB ALAHLI ensures regulatory sustainable funding and liquidity compliance in line with best risk across the bank in order to withstand management practices. unforeseen macroeconomic headwinds and shocks. The ICAAP process is an Risk identification, monitoring and important component of assessing control. capital adequacy of the bank, as well as The identification of principal risks is a providing a forward-looking process overseen by the Risk Division. assessment of QNB ALAHLI’s ability to The material risks are regularly operate in a more stressed economic reported to the Risk Committee (RC), situation. The results of this process together with a regular evaluation of help us to determine and plan how to the effectiveness of the risk-operating position the bank in the strongest controls. possible way. Through this, we ensure During 2020, Risk Division continued that we maintain healthy risk metrics the efforts to build up a strong risk in line with our approved risk appetite management framework. This and regulatory limits. framework consists of a comprehensive set of policies, standards, procedures Market Risk and processes designed to identify, Market Risk Exposures primarily relate measure, monitor and mitigate and to interest rate risk in the banking book report risk in a consistent and effective and exchange rate risk that generally manner. arise as a result of the Bank’s day - to – day business activities. The bank We continue to improve our manages its market risk via a frameworks for risk identification to comprehensive framework of limits ensure timely early-warning indicators that reflects a limited risk appetite. and decision making. This has resulted Oversight of market risk is delegated by in effective control of the non- the BOD to the Bank’s ALCO performing portfolio, operational risk Committee. losses, cyber and other fraud protections, preventions and exposure to market risk.
42 — QNB ALAHLI Annual Report 2020 Overview
Operational Risk for chronic disease cases and Report Strategic The operational risk Operational risk frameworks are activating remote access protocol while team in QNB continually being enhanced and applying all Information security embedded with improved business aspects. ALAHLI will continuity infrastructure and disaster continuously recovery sites Data quality and reporting on key risk Cyber Threats challenge the indicators continue to improve as the Cyber Security threats and incidents frameworks evolve. are rising worldwide. Cyber Security Performance businesses to Risk is one of the top agenda items in Operational Keep the operational risk at the lowest executive boards across all industries. assume greater level through applying best practices and complying with regulatory We at QNB ALAHLI place the highest accountability requirements, in line with the Bank’s priority on data security and deploy the through business strategy”. Promote a Bank’s strongest controls and processes to wide operational risk awareness and maintain our systems and customer’s identification, management culture, further data secured. contributing to a process efficiency and In 2020 QNB ALAHLI continued its measurement, efficacy. Social Corporate strategic investment program in Responsibility assessment and A transparent governance structure is technologies that protect the Bank established and maintained, with clear from constantly evolving sophisticated control of their own roles and responsibilities, ensuring cyber-attacks. appropriate oversight and on-going risks. The Information Security team consist review of the Operational Risk of specialist staff who are engaged in Management Framework. Risk detecting, monitoring and managing governance is discussed at Operational cyber security incidents, and blocking Risk Committee where all risks and
ongoing attacks. Management Risk actions are routinely analysed and and Governance
scrutinized and day-to-day activities QNB ALAHLI achieved PCI-DSS Corporate and issues are assigned and resolved. certification in October 2018 and is rectified in 2019, and 2020. We made further significant improvements to our operational risk This achievement demonstrates QNB’s frameworks, reflecting the growing commitment in investing and complexity of our business as it following best practices in order to continues to expand locally, and protect the cardholder and customer invested in new tools to help build data in its custody. Separate Financial Separate awareness. Our Operational Risk tools
We manage credit risk through a Statements are aligned with international framework of models, policies and standards providing better analysis of procedures that measure and facilitate all operational risk events and risks the management of credit risk. We and their potential impact on the Bank, ensure a strict segregation of duties customers, regulators and reputation. between front-line transaction The key components of operational risk originators and the Credit Risk framework are RCSA, actions function as reviewers and analysts. management and KRI’s which Our credit exposure limits are approved significantly enhance our capacity and
within a set credit approval and Consolidated ability to capture data, giving us a Statements authority framework. Financial deeper and more comprehensive view of our risks. The bank has an integrated process covering credit initiation, rating According to bank management validation, analytics, approvals, credit instructions, Operational Risk administration and documentation, Department has taken all required model risk validation controls, precautions to ensure bank staff safety collateral management and limits and business continuity during monitoring at multiple levels. Network Branches COVID-19 outbreak: ( Distributing disinfectant Hand Gel, latex gloves ,Surgical masks in all Bank premises, replacing internal & external training by e-learning, Working with decreased staff capacity with priority to pregnant/women staff in general and
QNB ALAHLI Annual Report 2020 — 43 Separate Financial Statements
44 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 45 KPMG Hazem Hassan BDO Khaled & Co. Public Accountants & Advisers Public Accountants & Consultants
AUDITORS’ REPORT To the shareholders of QNB ALAHLI Bank (S.A.E)
Report on the Separate Financial Statements We have audited the accompanying separate financial statements of QNB Al Ahli Bank (S.A.E.) which comprise the separate financial position as at December 31, 2020 and the related separate statements of income, comprehensive income, changes in equity, and cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for Separate the Financial Statements These separate financial statements are the responsibility of Bank’s management. Management is responsible for the preparation and fair presentation of these separate financial statements in accordance with the rules of preparation and presentation of the banks’ financial statements basis of recognition and measurement issued by Central Bank of Egypt on December 16, 2008 as amended by the regulations issued on February 26, 2019 and in light of the prevailing Egyptian laws and regulations, management responsibility includes designing, implementing and maintaining .internal control relevant to the preparation and fair presentation of the separate financial statements that are free from material misstatement, whether due to f aud or error; management responsibility also includes selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility Our responsibility is to express an opinion on these separate financial statements based on our audit. We conducted our audit in accordance with the Egyptian Standards on Auditing and in the light of the prevailing Egyptian laws. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the separate financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate financial statements. The procedmes selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the separate financial statements, whether due to fraud or error. In making those risk assessment, the auditor considers internal control relevant to the bank’s preparation and fair presentation of the separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the separate financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the separate financial statements.
46 — QNB ALAHLI Annual Report 2020 Overview
Opinion Report Strategic In our opinion, the separate financial statements referred to above present fairly, in all material respects, the separate financial position of QNB Al Ahly Bank (S.A.E) as of December 31, 2020 and of its separate financial performance and its separate cash flows for the year then ended, in accordance with the rules of preparation and presentation of the banks’ financial statements basis of recognition and measurement issued by Central Bank of Egypt on December 16, 2008 as amended by the regulations issued on February 26, 2019 and in light of the prevailing Egyptian laws and regulations related to the preparation of these separate :financial statements. Report on Legal and Other Regulatory Requirements According to the information and explanations given to us during the financial year ended December 31, 2020 no contravention of the Performance
Central Bank and Banking Sector Law No. 194 of 2020, Taking into consideration the grace period to comply with provisions of the Operational law. The bank maintains proper books of accounts, which include all that is required by law and the statues of the bank, the separate financial statements are in agreement thereto. The financial information included in the Board of Directors’ report which is prepared according to Law No. 159 of 1981 and its Executive Regulations and their amendments, is in agreement with the books of the bank insofar as such information is recorded therein. Corporate Social Social Corporate Responsibility
Auditors Risk Management Risk Aziz Maher Aziz Barsoum Mohanad T. Khaled and Governance Corporate Corporate FRA No.(228) Fellow of ACCA KPMG Hazem Hassan Fellow of ESAA Fellow of ETS R.A.A. 22444
FRA No. 375 Financial Separate
BDO Khaled & Co. Statements
Cairo, 12 January 2021 Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 47 QNB ALAHLI S.A.E Separate Statement of Financial Position As at 31 December 2020 (All amounts are shown in Egyptian Pounds)
Note December 31, 2020 December 31, 2019
Assets:
Cash and due from Central Bank of Egypt (CBE) (16) 17,166,854,367 12,012,821,372
Due from banks (17) 5,223,798,459 6,639,128,536
Treasury bills (18) 41,990,573,212 46,181,998,997
Loans and credit facilities to customers (19) 164,962,066,483 154,784,013,373
Financial derivatives (20) 106,092,208 83,458,859
Financial Investments:
Fair value through other comprehensive income (21) 2,474,382,352 2,463,888,129
Amortized cost (21) 46,068,820,147 39,973,893,488
Fair value through profit or loss (21) 71,688,942 61,678,473
Investments in subsidiaries and associates (22) 542,109,089 542,109,089
Intangible assets (23) 188,123,187 202,344,647
Other assets (24) 4,117,223,362 3,462,925,342
Deferred tax assets (31) 43,274,395 54,901,205
Property and equipment (25) 2,520,938,962 2,457,800,483
Total assets 285,475,945,165 268,920,961,993
Liabilities and equity:
Liabilities:
Due to banks (26) 4,138,835,958 16,030,665,382
Customer deposits (27) 233,892,109,030 209,065,365,497
Financial derivatives (20) 54,698,875 44,711,902
Other loans (28) 3,251,740,567 4,574,732,377
Other liabilities (29) 3,297,177,299 2,789,354,332
Other provisions (30) 586,820,076 717,548,592
Current income tax payable 1,288,010,783 1,038,088,421
Defined benefits obligation (32) 513,228,220 482,288,384
Total liabilities 247,022,620,808 234,742,754,887
Equity:
Issued and paid-up capital (33) 10,774,114,830 9,794,649,850
Reserves (34) 17,614,978,484 15,629,509,254
Profit for the year and retained earnings (34) 10,064,231,043 8,754,048,002
Total equity 38,453,324,357 34,178,207,106
Total liabilities and equity 285,475,945,165 268,920,961,993
Mohamed Osman El-Dib Chairman and Managing Director
The accompanying notes from (1) to (39) are an integral part of these Separate Financial Statements. (Auditor’s report attached).
48 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Separate Income Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
From January 01, 2020 From January 01, 2019 Note To December 31, 2020 To December 31, 2019
Interest on loans and similar income (6) 30,466,796,512 32,130,794,899 Strategic Report Strategic Cost of deposits and similar expense (6) (16,113,253,167) (18,562,824,914)
Net interest income 14,353,543,345 13,567,969,985
Fee and commission income (7) 2,337,288,072 2,504,801,366
Fee and commission expense (7) (489,650,227) (501,919,591)
Net interest, fee and commission income 16,201,181,190 15,570,851,760
Dividend income (8) 35,584,250 149,707,215
Net trading income (9) 98,761,017 109,613,390
Gain on financial investments (21) 6,483,172 6,631,154 Performance Operational Impairment credit losses (12) (2,104,233,392) (688,994,875)
Administrative expenses (10) (3,618,588,799) (3,416,271,433)
Other operating revenues (expenses) (11) (215,992,811) (558,813,932)
Profit before income tax 10,403,194,627 11,172,723,279
Income tax expense (13) (3,004,683,987) (2,851,192,481)
Net profit for the year 7,398,510,640 8,321,530,798
Earnings per share (14) 3.08 3.47 Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial
Mohamed Osman El-Dib Chairman and Managing Director Branches Network Branches
The accompanying notes from (1) to (39) are an integral part of these Separate Financial Statements.
QNB ALAHLI Annual Report 2020 — 49 QNB ALAHLI S.A.E Separate Statement of Comprehensive Income As at 31 December 2020 (All amounts are shown in Egyptian Pounds)
From January 01, 2020 From January 01, 2019 To December 31, 2020 To December 31, 2019
Net profit for the year 7,398,510,640 8,321,530,798
Other comprehensive income items that will not be reclassified to the Profit or Loss:
Net change in fair value of investments in equity instruments measured at fair value through other compre- (208,254,732) (29,707,972) hensive income
Tax impact related to other comprehensive income that will not be reclassified to the profit or loss 43,859,644 7,415,771
Amount transferred to retained earning, net of tax - (9,368,086)
Other comprehensive income items that is or may be reclassified to the profit or loss:
Net change in fair value of debt instruments measured at fair value through other comprehensive income 57,751,351 54,165,205
Tax impact related to other comprehensive income that will be reclassified to the profit or loss (12,994,054) (12,187,171)
Expected credit loss for fair value of debt instruments measured at fair value through other comprehensive 29,548 (29,494) income
Total other comprehensive income items for the year net of tax (119,608,243) 10,288,253
Total comprehensive income for the year, net of tax 7,278,902,397 8,331,819,051
50 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 51 QNB ALAHLI S.A.E Separate Statement of Changes in Equity For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Issued and Paid Up Legal Fair Value General Banking Risk IFRS 9 General Risk Retained General Reserve Special Reserve Capital Reserve Net Profit for the Year Total Capital Reserve Reserve Reserve Reserve Reserve Earnings
December 31, 2019
Balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 147,044,179 12,054,965 (679,178,263) 2,781,992 1,282,925,633 - 401,350,937 6,917,503,916 27,697,969,184
Transfer to general risk reserve - - - (152,225,804) - - - (1,282,925,633) 1,435,151,437 - - -
Impact of adopting IFRS 9 - - - 18,038,291 - 1,193,305,099 - - (1,413,697,514) 26,377,283 - (175,976,841)
Restated balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 12,856,666 12,054,965 514,126,836 2,781,992 - 21,453,923 427,728,220 6,917,503,916 27,521,992,343
Transfer to reserves and retained earnings - 345,553,468 4,886,735,548 - 6,434,554 - - - - (6,192,028) (5,232,531,542) -
Dividend distributions for year 2018 ------(1,684,972,374) (1,684,972,374)
Net Change in Other Comprehensive Income - - - - - 19,656,339 - - - - - 19,656,339
Reclassification of the net change in fair value of - - - - - (9,368,086) - - - 9,368,086 - - equity instruments upon derecognition
Net profit for the year ------8,321,530,798 8,321,530,798
Transfer from general banking risk reserve ------(1,612,926) - - 1,612,926 - -
Balance at 31 December 2019 9,794,649,850 1,633,301,744 13,417,823,247 12,856,666 18,489,519 524,415,089 1,169,066 - 21,453,923 432,517,204 8,321,530,798 34,178,207,106
December 31, 2020
Balance at 1 January 2020 9,794,649,850 1,633,301,744 13,417,823,247 12,856,666 18,489,519 524,415,089 1,169,066 - 21,453,923 432,517,204 8,321,530,798 34,178,207,106
Transfer to reserves and retained earnings - 415,932,039 2,665,720,403 - 2,890,011 - - - - 2,233,203,199 (5,317,745,652) -
Dividend distributions for year 2019 ------(3,003,785,146) (3,003,785,146)
Transfer from general reserve to capital increase 979,464,980 - (979,464,980) ------
Net change in other comprehensive income - - - - - (119,608,243) - - - - - (119,608,243)
Net profit for the year ------7,398,510,640 7,398,510,640
Balance at 31 December 2020 10,774,114,830 2,049,233,783 15,104,078,670 12,856,666 21,379,530 404,806,846 1,169,066 - 21,453,923 2,665,720,403 7,398,510,640 38,453,324,357
The accompanying notes from (1) to (39) are an integral part of these Separate Financial Statements.
52 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Separate Statement of Changes in Equity Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Issued and Paid Up Legal Fair Value General Banking Risk IFRS 9 General Risk Retained General Reserve Special Reserve Capital Reserve Net Profit for the Year Total Capital Reserve Reserve Reserve Reserve Reserve Earnings Strategic Report Strategic
December 31, 2019
Balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 147,044,179 12,054,965 (679,178,263) 2,781,992 1,282,925,633 - 401,350,937 6,917,503,916 27,697,969,184
Transfer to general risk reserve - - - (152,225,804) - - - (1,282,925,633) 1,435,151,437 - - -
Impact of adopting IFRS 9 - - - 18,038,291 - 1,193,305,099 - - (1,413,697,514) 26,377,283 - (175,976,841)
Restated balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 12,856,666 12,054,965 514,126,836 2,781,992 - 21,453,923 427,728,220 6,917,503,916 27,521,992,343
Transfer to reserves and retained earnings - 345,553,468 4,886,735,548 - 6,434,554 - - - - (6,192,028) (5,232,531,542) -
Dividend distributions for year 2018 ------(1,684,972,374) (1,684,972,374)
Net Change in Other Comprehensive Income - - - - - 19,656,339 - - - - - 19,656,339 Performance Operational Reclassification of the net change in fair value of - - - - - (9,368,086) - - - 9,368,086 - - equity instruments upon derecognition
Net profit for the year ------8,321,530,798 8,321,530,798
Transfer from general banking risk reserve ------(1,612,926) - - 1,612,926 - -
Balance at 31 December 2019 9,794,649,850 1,633,301,744 13,417,823,247 12,856,666 18,489,519 524,415,089 1,169,066 - 21,453,923 432,517,204 8,321,530,798 34,178,207,106
December 31, 2020 Corporate Social Social Corporate
Balance at 1 January 2020 9,794,649,850 1,633,301,744 13,417,823,247 12,856,666 18,489,519 524,415,089 1,169,066 - 21,453,923 432,517,204 8,321,530,798 34,178,207,106 Responsibility
Transfer to reserves and retained earnings - 415,932,039 2,665,720,403 - 2,890,011 - - - - 2,233,203,199 (5,317,745,652) -
Dividend distributions for year 2019 ------(3,003,785,146) (3,003,785,146)
Transfer from general reserve to capital increase 979,464,980 - (979,464,980) ------
Net change in other comprehensive income - - - - - (119,608,243) - - - - - (119,608,243)
Net profit for the year ------7,398,510,640 7,398,510,640
Balance at 31 December 2020 10,774,114,830 2,049,233,783 15,104,078,670 12,856,666 21,379,530 404,806,846 1,169,066 - 21,453,923 2,665,720,403 7,398,510,640 38,453,324,357 Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 53 QNB ALAHLI S.A.E Separate Statement of Cash Flow For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Note December 31, 2020 December 31, 2019
Cash flows from operating activities
Profit before tax 10,403,194,627 11,172,723,279
Adjusted by:
Property and Equipment depreciation and Intangible assets amortization (10) 331,969,579 287,647,893
Impairment credit losses (12) 2,104,233,392 688,994,875
Loans written off during the year (284,114,917) (233,452,342)
Recovery from loans previously written off 18,569,861 25,455,529
Net formed / (reversed) other provisions (127,565,295) (77,765,608)
Utilized provisions other than loans provision (2,477,510) (9,327,850)
Translation differences of other provisions in foreign currencies (685,711) (6,533,904)
Translation differences resulting from monetary foreign currency investments 45,587,902 290,744,041
Amortization of premium / discount for bonds (61,463,650) (71,644,830)
(Gain) on sale of Property and Equipment (7,767,605) (2,890,011)
Dividend income (8) (35,584,250) (149,707,215)
Gain on financial investments (21) (6,483,172) (6,631,154)
Operating profits before changes in assets and liabilities resulting from operating activities 12,377,413,251 11,907,612,703
Net decrease / increase in assets and liabilities
Due from banks (5,162,602,627) (1,222,941,758)
Treasury bills 3,570,437,326 1,209,675,192
Loans and credit facilities to customers (12,022,688,650) (18,234,810,164)
Financial derivatives (12,646,376) (35,615,581)
Financial investement recognized at fair value through profit or loss (10,010,469) (16,294,730)
Other assets (654,051,759) (414,267,972)
Due to banks (11,891,829,424) 3,322,886,112
Customer deposits 24,826,743,533 1,715,420,402
Other liabilities 507,822,967 271,569,329
Defined benefits obligation 30,939,836 44,466,899
Income tax paid (2,712,269,225) (2,432,246,552)
Net cash flows resulting from / used in operating activities (1) 8,847,258,383 (3,884,546,120)
Cash flows from investing activities
Acquisition of Property and Equipment and Intangible assets (381,165,148) (549,959,590)
Proceeds from sale of Property and Equipment 8,046,155 3,241,503
Proceeds from financial investments other than held for trading investments 6,931,884,188 4,512,851,605
Acquisition of financial investments other than held for trading investments (13,154,736,875) (6,997,299,939)
Acquisition of Investments in subsidiaries - (250,000,000)
Dividends received 35,584,250 49,724,215
Net cash flows used in investing activities (2) (6,560,387,430) (3,231,442,206)
Cash flows from financing activities
Other loans (1,322,991,810) 1,988,325,965
Dividends paid (3,003,785,146) (1,684,972,374)
Net cash flows used in financing activities (3) (4,326,776,956) 303,353,591
Net decrease in cash and cash equivalents during the year (1+2+3) (2,039,906,003) (6,812,634,735)
Cash and cash equivalents at the beginning of the year 11,224,767,492 18,037,402,227
Cash and cash equivalents at the end of the year (35) 9,184,861,489 11,224,767,492
Cash and cash equivalents at end of the year are represented in :
Cash and due from Central Bank of Egypt 17,166,854,367 12,012,821,372
Due from banks (16) 5,234,406,137 6,648,253,897
Treasury bills (17) 42,008,511,859 46,196,437,796
Balances with Central Bank of Egypt (mandatory reserve) (13,325,733,984) (8,056,431,357)
Balances Due from banks with maturities more than 3 months - (106,700,000)
Treasury bills with maturity more than 3 months (41,899,176,890) (45,469,614,216)
Cash and cash equivalents at end of the year 9,184,861,489 11,224,767,492
The accompanying notes from (1) to (39) are an integral part of these Separate Financial Statements.
54 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Statement of profit Distribution proposal Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020 December 31, 2019
Net year’s profits (from income statements) 7,398,510,640 8,321,530,798
Deduct/Add Report Strategic
Profits of sale fixed assets transferred to capital reserve )7,767,605( )2,890,011(
Change in General Banking Risk Reserve - 1,612,926
Item transferred to retrained earrings - 9,368,086
Distributable year›s net profits 7,390,743,035 8,329,621,799
Add
Beginning balance of retained earnings 2,665,720,403 421,536,192
Total 10,056,463,438 8,751,157,991
To be distributed as follows Performance Operational
Statutory reserve 369,537,152 415,932,039
General reserve 4,428,972,276 2,665,720,403
Shareholders› Dividends - 2,154,822,966
Employees› profit share 739,074,304 832,962,180
Remuneration for board members 16,000,000 16,000,000
*Banking System Support and Development Fund 73,907,430 -
Retained earnings carried forward 4,428,972,276 2,665,720,403 Social Corporate Responsibility Total 10,056,463,438 8,751,157,991
According to Article 178 of the Central Bank and Banking System's Law No. 194 for year 2020, to deduct an amount not exceeding %1 of the distributable yearʼs net profits for the benefit of the Support and Development the Banking System Fund. Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 55 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
1. Background: QNB ALAHLI «S.A.E» («The Bank») was incorporated as an investment and commercial bank on April 13, 1978, in accordance with the provisions of the Investment Law no 43 of 1974 and its executive regulations and the amendments thereon. The Bank provides all banking services related to its activity, through its Head Office located in 5 Champlion Street - Downtown - Cairo and its 231 branches served by 6,550 staff at the date of the financial statements. The Bank is listed on the Egyptian Stock Exchange (EGX). These Financial statements were approved by the Board of Directors on January 12, 2021. 2. Summary of significant accounting policies:- 2.1 Basis of preparation of the separate financial statements These separate financial statements have been prepared in accordance with the instructions of the Central Bank of Egypt (CBE) rules approved by its Board of Directors on December 16, 2008; and as per IFRS 9 “Financial Instruments” in accordance with the instructions of the Central Bank of Egypt (CBE) dated February 26, 2019. The separate and consolidated financial statements of the Bank and its subsidiaries have been prepared in accordance with the instructions of the Central Bank of Egypt (CBE) rules, the affiliated companies are entirely included in the consolidated financial statements and these companies are the companies that the Bank - directly or indirectly has more than half of the voting rights or has the ability to control the financial and operating policies, regardless of the type of activity, the Bank’s consoli- dated financial statements can be obtained from the Bank’s management. The Bank accounts for investments in subsidiaries and associate companies in the separate financial statements at cost minus impairment loss. The separate financial statements of the Bank should be read with its consolidated financial statements, for the year ended on December 31, 2020 to get complete information on the Bank’s financial position, income statements, cash flows and change in shareholders equity.
2.2 Accounting for Investments in subsidiaries and associates Investments in subsidiaries and associates are presented in the attached separate financial statements using the cost method which represents the bank’s direct share ownership and not according to the business results and the net assets of the investees. And the consolidated financial statements provide a wider understanding for the consolidated financial position, business results and the consolidated cash flows for the bank and its subsidiaries (The Group), including the bank’s share in the net assets of its associate companies. 2.2.1 Investments in subsidiaries Subsidiaries are entities (including Special Purposes Entities / SPEs) which the bank exercises direct or indirect control over its financial and operating policies in order to get benefits from its activities and usually have an ownership share of more than half of its voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered in assessing whether the bank has the control over its investees. 2.2.2 Investments in associates Associates are entities over which the bank exercises significant influence directly or indirectly, but without exercising control or joint control, where the bank holds 20% to 50% of voting rights in the associate. The purchase method is used to account for the bank’s purchases of subsidiaries and associates when they are initially recognized; the acquisition date is the date on which the acquirer obtains control or significant influence of acquiree “subsidiary or associate”. According to the purchase method, the investments in subsidiaries and associates are initially recognized at cost (which may be incorporated goodwill). The acquisition cost represents the fair value of the consideration given in addition to the other acquisition related costs. In business combination achieved in stages, and business combination achieved through more than one transaction, is then dealing with every transaction of such transactions that separately on the basis of the acquisition consideration and fair value information at the date of each transition until the date where the control is achieved. The investments in subsidiaries and associates are subsequently accounted for using the cost method on the separate financial statements. According to the cost meth- od; investments are recognized at acquisition cost less any impairment losses in value, if any. Dividends are recognized as revenue in the separate income statement when they are declared and the bank’s right to collect them has been established. 2.3 Segment reporting An operating segment is a group of assets and operations providing products or services whose risks and benefits are different from those associated with products or services provided by other operating segments. A geographical segment provides products or services within a specific economic environment characterized by risks and benefits different from those related to other geographical segments operating in a different economic environment. The Bank is divided into two main business lines, which are corporate banking and retail banking. In addition, a corporate center acts as a central funding department for the bank’s core businesses. The dealing room, proprietary activity and other non-core businesses are reported under the corporate banking business line. For the purpose of preparation of segment reporting by geographical region, segment profit or loss and assets and liabilities are presented based on the location of the branches. Given that the bank does not have any entity abroad, and unless otherwise stated in a specific disclosure, all equity and debt instruments of the bank issued by foreign institutions and credit facilities granted to foreign counterparties are reported based on the location of the domestic branch where such assets are recorded. 2.4 Foreign currency translation 2.4.1 Functional and presentation currency The separate financial statements of the bank are presented in the Egyptian pound which is the bank’s functional and presentation currency. 2.4.2 Transactions and balances in foreign currencies The Bank maintains its accounting records in Egyptian pounds. Transactions in foreign currencies during the period are translated into the Egyptian pounds using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated at end of reporting period at the exchange rates then prevailing. Foreign exchange gains and losses resulting from settlement and translation of such transactions and balances are recognized in the income statement and reported under the following line items: › Net trading income from held for trading assets and liabilities; › Other operating revenues (expenses) from the remaining assets and liabilities; › Investments in equity instrument recognized at fair value through other comprehensive income in equity.
56 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Changes in the fair value of investments in debt instruments; which represent monetary financial instruments, denominated in foreign currencies and classified as FVTOCI assets are analyzed into differences resulting from changes in the amortized cost of the instrument, differences resulting from changes in the applicable exchange rates and differences resulting from changes in the fair value of the instrument. Differences resulting from changes in the amortized cost are recognized and reported in the income statement in “Interest on loans and similar income” whereas differences resulting from changes in foreign exchange rates are recognized and reported in “Other operating revenues (expenses)”. The remaining differences resulting from changes in fair value are recognized in equity and accumulated in the “Fair Report Strategic value reserve” in Other Comprehensive Income. Valuation differences arising on the measurement of non-monetary items at fair value include gains or losses resulting from changes in foreign currency exchange rates used to translate those items. Total fair value changes arising on the measurement of equity instruments classified as at fair value through the profit or loss are recognized in the income statement, whereas total fair value changes arising on the measurement of equity instruments classified as FVTOCI are recognized directly in equity in the “Fair value revaluation reserve” in Other comprehensive income. 2.5 Financial assets Financial assets classified as amortized cost, fair value through other comprehensive income (FVTOCI) and fair value through profit or loss (FVTPL). The classification depends on the buisness model of the financial assets that are managed with its contractual cash flow and is determined by management at the time of initial recogni- tion. Performance
2.5.2.1 Financial assets classified as amortized cost Operational The financial asset is retained in the business model of financial assets held to collect contractual cash flow. The objective from this business model is to collect contrac- tual cash flow which represented in principal and interest. The sale is an exceptional event for the purpose of this model and under the terms of the standard represent- ed in following: › Significant deterioration for the issuer of financial instrument; › Lowest sales in terms of rotation and value; › A clear and reliable documentation process for the justification of each sale and its conformity with the requirements of the standard. 2.5.2.2 Financial assets classified as fair value through other comprehensive income
The financial asset is retained in the business model of financial assets held to collect contractual cash flows and sales. Held to collect contractual cash flows and sales Social Corporate are integrated to achieve the objective of the model. Sales are high in terms of turnover and value as compared to the business model retained for the collection of con- Responsibility tractual cash flows. 2.5.2.3 Financial assets classified as fair value through profit or loss The financial asset is held in other business models including trading, management of financial assets at fair value, maximization of cash flows through sale. The objective of the business model is not to retain the financial asset for the collection of contractual or retained cash flows for the collection of contractual cash flows and sales. Collecting contractual cash flows is an incidental event for the objective of the model. › The characteristics of the business model are as follows: › Structuring a set of activities designed to extract specific outputs; Risk Management Risk › Represents a complete framework for a specific activity (inputs - activities - outputs); and Governance Corporate Corporate › One business model can include sub-business models. 2.6 Offsetting of financial assets and financial liabilities Financial assets and liabilities are offset when the bank has a legally enforceable right to offset the recognized amounts and it intends to settle these amounts on a net basis, or realize the asset and settle the liability simultaneously. 2.7 Financial derivatives and hedge accounting Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Fair values are determined based on quoted market prices in active markets, including recent market transactions, or valuation techniques, including discounted cash flow models and options pricing models, as appropriate. All derivatives are recognized as assets when their fair value is positive and as liabilities when their fair value is negative. Separate Financial Separate Embedded derivatives, such as the conversion option in a convertible bond, are treated as separate derivatives if they meet the definition of a financial instruments, and when their economic characteristics and risks are not closely related to those of the host contract, provided that the host contract is not classified as at fair value Statements through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in the income statement “Net trading income” ;unless the bank chooses to designate the hybrid contract as a whole as at fair value through profit or loss. The timing of recognition in profit or loss, of any gains or losses arising from changes in the fair value of derivatives, depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. The parent bank designates certain derivatives as: › Hedging instruments of the risks associated with fair value changes of recognized assets or liabilities or firm commitments (fair value hedge); › Hedging of risks relating to future cash flows attributable to a recognized asset or liability or a highly probable forecast transaction (cash flow hedge). Hedge accounting is used for derivatives designated in a hedging relationship when the following criteria are met. At the inception of the hedging relationship, the bank documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various Consolidated hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the bank documents whether the hedging instrument is highly effective in Statements Financial offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Branches Network Branches
QNB ALAHLI Annual Report 2020 — 57 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.7.1 Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized immediately in the profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The effective portion of changes in the fair value of the interest rate swaps and the changes in the fair value of the hedged item attributable to the hedged risk are recognized in profit or loss. Additionally, interest differential on interest rate swaps is recognized in profit or loss as part of “Net interest income” line item in the income statement. Any ineffectiveness is recognized in profit or loss in “Net trading income”. When the hedging instrument no longer qualifies for hedge accounting, the adjustment to the carrying amount of a hedged item, measured at amortized cost, arising from the hedged risk is amortized to profit or loss from that date to maturity of the asset using the effective interest method. Adjustment to the carrying amount of a hedged equity instrument that has been deferred in equity remains in equity until the asset is derecognized.
2.7.2 Cash flow hedge The effective portion of changes in the fair value of derivatives designated and effective for cash flow hedge is recognized in equity while changes in fair value relating to the ineffective portion is recognized immediately in the income statement in “Net trading income”. Amounts accumulated in equity are transferred to income statement in the relevant periods when the hedged item affects the income statement. The effective portion of changes in fair value of interest rate swaps and options are reported in “Net trading income”. When a hedging item expires, or is sold or if hedging instrument no longer qualifies for hedge accounting requirements, gains or losses that have been previously accumulated in equity remain in equity and are only recognized in profit or loss when the forecast transaction ultimately occurs. If the forecast transaction is no longer expected to occur, any related cumulative gain or loss on the hedging instrument that has been recognized in equity shall be reclassified immediately to profit or loss. 2.7.3 Derivatives that do not qualify for hedge accounting Where a derivative instrument does not qualify for hedge accounting, changes in fair value of that derivative and related interest are recognized immediately in the income statement in “Net trading income” line item. However, gains or losses arising from changes in fair value of derivatives that are managed in conjunction with financial assets or financial liabilities, designated upon initial recognition at fair value through profit or loss, are included in “Net income from financial instruments designated upon initial recognition as at fair value through profit or loss”. 2.8 Interest income and expense Interest income and expense on all interest-bearing financial instruments are recognized in “Interest income” and “Interest expense” line items in the income statement using the effective interest rate method. The effective interest rate is a method of calculating the amortized cost of a debt instrument whether a financial asset or a financial liability and of allocating its interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial debt instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability on initial recognition. When calculating the effective interest rate, the bank estimates the future cash flows, considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Interest income on loans is recognized on an accrual basis except for the interest income on non-performing loans, which ceases to be recognized as revenue when the recovery of interest or principle is in doubt. Interest income on non-performing or impaired (Stage 3) loans and receivables ceases to be recognized in profit or loss and is rather recorded off-balance sheet in statis- tical records. Interest income on these loans is recognized as revenue on a cash basis as follows: 1- For retail loans, personal loans, small and medium business loans, real estate loans for personal housing and small loans for businesses, when interest income is collected and after recovery of all arrears. 2- For corporate loans, interest income is recognized on a cash-basis after the bank collects 25% of the rescheduled installments and provided these installments contin- ue to be paid for at least one year. If a loan continues to be performing thereafter, interest accrued on the principal then outstanding starts to be recognized as revenues. Interest that is marginalized prior to the date when the loan becomes performing is not recognized in the profit or loss except when the total balance of loan, prior to that date, is paid in full. 2.9 Fees and commission income Fees charged for servicing a loan or facility that is measured at amortized cost, are recognized as revenue as the service is provided. Fees and commissions on non-per- forming or impaired loans or receivables cease to be recognized as income and are rather recorded off balance sheet. These are recognized as revenue - on a cash basis - only when interest income on those loans is recognized in profit or loss, at which time, fees and commissions that are an integral part of the effective interest rate of a financial asset are treated as an adjustment to the effective interest rate of that financial asset. Commitment fees received by the bank to originate a loan are deferred if it is probable that the bank will enter into a specific lending arrangement and are regarded as a compensation for an ongoing involvement with the acquisition of the financial instrument and recognized as an adjustment to the effective interest rate. If the commit- ment expires without the bank making the loan, the fees are recognized as revenue on expiry. Loan syndication fees received by the bank are recognized as revenue when the syndication has been completed, only if the bank arranges the loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants). Fees and commissions that are earned on negotiating or participating in the negotiation of a transaction in favor of another entity, such as arrangements for the allot- ment of shares or another financial instrument or acquisition or sale of an enterprise on behalf of a client, are recognized as revenue when the transaction has been com- pleted. Administrative consultations and other service fees are usually recognized as revenue on a straight-line basis over the period in which the service is rendered. Fees from financial planning management and custodian services provided to clients over long periods are usually recognized as revenue on a straight-line basis over the period in which these services are rendered. 2.10 Dividends income Dividend income on investments in equity instruments and similar assets is recognized in the income statement when the bank’s right to receive payment is estab- lished.
58 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.11 Purchase and resale agreements and sale and repurchase agreements (repos and reverse repos) Financial instruments sold under repurchase agreements are not derecognized from the statement of financial position and cash receipts are shown in liability side in the statement of financial position. Strategic Report Strategic 2.12 Impairment of financial assets The Bank reviews all its financial assets except for financial assets that are measured at fair value through profit or loss to assess the extent of impairment as described below. Financial assets are classified at three stages at each reporting date: – Stage 1 : Financial assets that have not experienced a significant increase in credit risk since the date of initial recognition, and the expected credit loss is calculat- ed for 12 months. – Stage 2 : Financial assets that have experienced a significant increase in credit risk since the initial recognition or the date on which the investments are made, and the expected credit loss is calculated over the life of the asset. – Stage 3 :Impairment of financial assets whose expected credit loss is to be recognized over the life of the asset on the basis of the difference between the carrying
amount of the instrument and the present value of expected future cash flows. Performance Operational – Credit losses and impairment losses on the value of financial instruments are measured as follows:
› The low risk financial instrument is classified at initial recognition in the first stage and credit risk is monitored continuously by the Bank’s credit risk manage- ment. › If it is determined that there has been a significant increase in credit risk since the initial recognition, the financial instrument is transferred to the second stage where it is not yet considered impaired at this stage. › If there are indicators of impairment of the financial instrument, it is transferred to the third stage. Corporate Social Social Corporate › The financial assets created or acquired by the Bank and include a high credit risk ratio for the Bank’s low risk financial assets are recognized on the initial recogni- Responsibility tion of the second stage directly and therefore the expected credit losses are measured on the basis of expected credit losses over the life of the asset. 2.12.2.1 Significant increase in credit risk The Bank considers that the financial instrument has experienced a significant increase in the credit risk when one or more of the following quantitative and qualitative criteria, as well as the factors relating to default, have been met. 2.12.2.2 Quantitative factors When the probability of default over the remaining life of the instrument is increased from the date of the financial position compared to the probability of default over the remaining life expected at initial recognition in accordance with the Bank’s acceptable risk structure. Risk Management Risk
2.12.3 Qualitative Factors and Governance Retail loans,micro and small businesses Corporate Corporate If the borrower encounters one or more of the following events: › The borrower submits a request to convert short-term to long-term payments due to negative effects on the borrower’s cash flows. › Extension of the deadline for repayment at the borrower’s request. › Frequent Past dues over the previous 12 months. › Future adverse economic changes affecting the borrower’s future cash flows. Corporate loans and Medium businesses If the borrower has a follow-up list and / or financial instrument faced one or more of the following events: Financial Separate Statements › A significant increase in the rate of return on the financial asset as a result of increased credit risk. › Significant negative changes in the activity and physical or economic conditions in which the borrower operates. › Scheduling request as a result of difficulties facing the borrower. › Significant negative changes in actual or expected operating results or cash flows. › Future economic changes affecting the borrower’s future cash flows. › Early indicators of cash flow / liquidity problems such as delays in servicing creditors / business loans. › Cancellation of a direct facility by the bank due to the high credit risk of the borrower. Consolidated Statements
Nonpayments Financial The loans and facilities of institutions, medium, small, micro and retail banking are included in stage two if the period of non-payment is more than 60 days and less than 90 days. Note that this period (60 days) will be reduced by (10) days per year to become (30) days during (3) years from the date of application (Year 2019). Transfer between the Three stages: Transfer from second stage to first stage: The financial asset shall not be transferred from the second stage to the first stage unless all the quantitative and qualitative elements of the first stage are met and the full arrears of the financial asset and the proceeds are paid. Branches Network Branches
QNB ALAHLI Annual Report 2020 — 59 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Transfer from third stage to second stage: The financial asset shall not be transferred from the third stage to the second stage until all the following conditions have been met: › Completion of all quantitative and qualitative elements of the second stage; › Repayment of 25% of the balance of the outstanding financial assets, including accrued segregated / statistical interest; › Regularity of payment for at least 12 months. 2.13 Intangible assets 2.13.1 Goodwill Goodwill, arising from the acquisition or legal merger of subsidiaries, represents the difference between the cost of the combination and the acquiree interest in the fair value of the identifiable assets, liabilities and qualifying contingent liabilities of the acquire at the acquisition date. Goodwill is annually tested for impairment and is written-down to profit or loss at an annual amortization of 20% or impairment loss whichever is higher. 2.13.2 Software (computer programs) Expenditure on upgrade and maintenance of computer programs is recognized as an expense in the income statement in the period in which it is incurred. Expenditures directly incurred in connection with specific software are recognized as intangible assets if they are controlled by the group and when it is probable that they will gener- ate future economic benefits within more than one year that exceed its cost. Direct costs include the cost of the staff involved in upgrading the software in addition to a reasonable portion of relative overheads. Upgrade costs are recognized and added to the original cost of the software when it is likely that such costs will increase the efficiency or enhance the performance of the computers software beyond its original specification. Cost of computer software recognized as an asset shall be amortized over the year of expected benefits from three to five years except for the core IT system which is amortized over ten years. 2.14 Property and Equipment The Group’s property and equipment include lands and buildings of the bank which basically comprise the head office premises and branch buildings. All property and equipment are carried at historical cost net of accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the construction or acquisition of the items. Subsequent costs are included in the assets carrying amount or recognized separately, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the bank and the cost of the item can be measured reliably. Repairs and maintenance expenses are recognized in profit or loss within “other operating costs” line item during the financial period in which they are incurred. The Bank considers the residual value of its property and equipment as insignificant and immaterial in relation to the depreciable amount; therefore, the depreciable amount of the bank’s property and equipment is determined without any deduction for residual values. Depreciation is charged so as to write off the cost of assets, other than land which is not depreciated, over their estimated useful lives, using the straight-line method based on the following annual rates:
Buildings 50 years
Decoration & installations 10 years
Lifts 15 years
Electricity & Air conditioning 10 years
Fixtures Generators 30 years
Telephone network & CCTV 10 years
Firefighting system & Plumbing system 10 years
Other installations 10 years
Leasehold improvements The shortest of 10 years or contract period
Depreciation periods for property and equipment, other than buildings, depend on their useful lives which are usually estimated as specified below:
Furniture 10 years
Armored vaults 20-30 years
IT equipment 5 years
Electric appliances 5 years
Vehicles 5 years
The bank reviews the carrying amounts of its depreciable property and equipment whenever changes in circumstances or events indicate that the carrying amounts of those assets may not be recovered. Where the carrying amount of an asset exceeds its recoverable amount, the carrying amount is reduced to its recoverable amount. The recoverable amount of an asset is the higher of the asset’s net realizable value or value in use. Gains or losses on disposals are determined by comparing proceeds with relevant carrying amount. These are included in the profit or loss in other operating income (expenses) in the income statement. 2.15 Impairment of non-financial assets Non-financial assets that do not have definite useful lives, except for goodwill, are not amortized. These are annually tested for impairment. Depreciable property and equipment are tested for impairment whenever changes in circumstances or events indicate that the carrying amounts of those assets may not be recovered. Impair- ment loss is recognized and the carrying amount of an asset is reduced to the extent that such carrying amount exceeds the asset’s recoverable amount. The recoverable amount of an asset is the higher of the asset’s net realizable value or value in use. For the purpose of estimating the impairment loss, where it is not possible to estimate the recoverable amount of an individual asset, the bank estimates the recoverable amount of the cash-generating unit to which the asset belongs is estimated. At the end of each year, the bank reviews non-financial assets for which an impairment loss is recognized to assess whether or not all or part of such impairment losses should be reversed through profit or loss.
60 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.16 Leasing All lease contracts to which the bank is a party are treated as operating or finance leases as follows:. 2.16.1 As a lessee Strategic Report Strategic Lease payments made under operating leases, net of any discounts received from the lessor, are recognized as an expense in the profit or loss on a straight-line basis over the lease term. 2.16.2 As a lessor Assets leased out under operating lease contracts are reported as part of the property and equipment in the statement of financial position and are depreciated over the expected useful lives of the assets, on the same basis as other property assets. Lease rental income is recognized in profit or loss, net of any discounts granted to the lessee, using the straight line method over the contract term. 2.17 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise balances due within three months from date of placement or acquisition. They include cash and balances placed with the Central Bank of Egypt (other than those required under the mandatory reserve), current accounts with Banks and treasury bills, certificates of deposits and other governmental notes. Performance Operational 2.18 Other provisions Provisions for obligations, other than those for credit risk or employee benefits, due within more than 12 months from the date of Separate financial statements are recognized based on the present value of the best estimate of the consideration required to settle the present obligation at the reporting date. An appropriate pretax discount rate that reflects the time value of money is used to calculate the present value of such provisions. For obligations due within less than twelve months from the date of Separate financial statements, provisions are calculated based on undiscounted expected cash outflows unless the time value of money is material, in which case provisions are measured at present value. When a provision is wholly or partially no longer required, it is reversed through the profit or loss under “Other Operating Income (expenses)” line item. 2.19 Financial guarantees
A financial guarantee contract is a contract issued by the bank as security for loans or overdrafts due from its clients to other entities that requires the bank to make Social Corporate Responsibility specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees are generally issued by the bank to beneficiary banks, corporations and other entities on behalf of the bank’s cli- ents. When a financial guarantee is recognized initially, it is measured at its fair value plus, transaction costs that is directly attributable to the issue of such financial guaran- tee. After initial recognition, a financial guarantee contract issued by the bank is measured at the higher of: (I) The amount initially recognized less, when appropriate, cumulative amortization of security fees recognized as income in profit or loss using the straight-line method over the term of the guarantee; and Risk Management Risk
(II) The best estimate for the payments required to settle any financial obligation resulting from the financial guarantee at the reporting date. and Governance
Such estimates are made based on experience in similar transactions and historical losses as supported by management judgment. Corporate Any increase in the obligations resulting from the financial guarantee, shall be recognized within other operating income (expenses) in the income statement. 2.20 Employee benefits Post-employment benefits (defined benefit plans) and defined contribution plans: The Bank is liable for all obligations arising from its plans for employee benefits which comply, in all material respects, with the principles set out below. Starting 1 Jan- uary 2009, the bank has fully complied with the policy referred to below, and recognized any adjustments, resulting from the first full implementation of amendments to the CBE rules, directly on retained earnings. The Bank provides several post-employment benefits to its employees, such as the medical care scheme which qualifies as a defined-benefit plan. A defined benefit plan commits the bank, either formally or constructively, to pay a certain amount or level of future benefits and therefore bears the medium- or long-term risk. Financial Separate
The Bank recognizes the defined benefit obligation as a liability in the statement of financial position under “obligations for post-retirement schemes” to cover the total Statements value of such obligations. This is assessed regularly by independent actuary using the projected unit credit method. This valuation technique incorporates assumptions about demographics variables, staff turnover, salary growth rate and discount and inflation rates. When these plans are financed from external funds classified as plan assets, the fair value of these funds is subtracted from the defined benefit obligation. Differences arising from changes in the actuarial assumptions and estimates are recognized in the income statement as actuarial gains or losses to the extent of the higher of the following two amounts as of the end of the previous financial period: • 10% of the present value of the defined benefit obligation (before deducting plan assets); and • 10% of the fair value of the plan assets. Actuarial gains and losses that exceed the 10 percent criteria above are amortized to profit or loss over the expected average remaining working lives of the participat- Consolidated Statements
ing employees. Financial Past service cost is recognized immediately to the extent that the benefits have already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. Annual cost of employee benefits plans is reported as part of general and administrative expenses (employee costs). Defined contribution plans are pension schemes whereby the bank pays defined contributions to an independent entity. The Bank shall not be under legal or construc- tive obligation to pay more contributions if this entity doesn’t maintain adequate assets to pay-off the employees’ benefits in return for their service in the current and previous periods. According to the defined contribution plans, the bank pays contributions to private sector pension scheme under mandatory or voluntary contractual arrangement. The Bank shall be under no additional obligation other than the contribution payments. Contributions to defined contribution retirement benefit plans are recognized as employee benefits cost when employees have rendered service entitling them to the contributions. Prepaid contributions shall be recognized as assets to the extent that Network Branches these contribution payments will reduce future payments or result in cash refunds. 2.21 Income taxes Income tax expense on the years’s profit or loss represents the sum of the tax currently payable and deferred tax and is recognized in the income statement, except when they relate to items that are recognized directly in equity, in which case the tax is also recognized in equity. The Bank’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period, in addition to income tax differences related to prior years.
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Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the separate financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting year.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. However, when it is expected that the tax benefit will increase, the carrying amount of deferred tax assets shall increase to the extent of previous reduction. 2.22 Borrowings Loans obtained by the bank are initially recognized at fair value net of transaction costs incurred in connection with obtaining the loan. Borrowings are subsequently measured at amortized cost, with the difference between net proceeds and the value to be paid over the borrowing period, recognized in profit or loss using the effective interest rate method. 2.23 Capital 2.23.1 Capital issuance cost Issued and paid up-capital (i.e. Bank›s own equity instruments) is initially measured at the cash proceeds received, less transaction costs directly attributable to the issuance of new shares, issuance of shares to effect business combination, or issue of share options. Transaction costs, net of tax benefits, are reported as a deduction from equity. 2.23.2 Dividends Dividends on equity instruments issued by the bank are recognized when the general assembly of the bank’s shareholders approves them. Dividends include the em- ployees’ profit share and the board of directors’ remuneration as prescribed by the bank›s articles of incorporation and the corporate law. 2.24 Fiduciary activities The Bank carries out fiduciary activities that result in ownerships or management of assets on behalf of individuals, trusts, and retirement benefit plans and other institutions. These assets and income arising thereon are not recognized in the bank’s separate financial statements, as they are not assets or income of the bank. 2.25 Comparative figures Comparative figures are reclassified, where necessary, to conform to changes in the current period’s financial statements presentation. 3. Management of financial risks The Bank as a result of conducting its activities is exposed to various financial risks. Since financial activities are based on the concept of accepting risks and analyzing and managing individual risks or group of risks altogether, the bank aims at achieving a well-balanced risks and relevant rewards, as appropriate and to reduce the probable adverse effects on the bank’s financial performance. The most important types of risks are credit risk, market risk, liquidity risk and other operating risks. The market risk comprises foreign currency risk, interest rate risk and other pricing risks. For example, the bank has laid down to determine and analyze the risks, set limits to the risks and control them through reliable methods and up–to–date systems. The Bank regularly reviews the risk management policies and systems and amendments thereto, so that they reflect the changes in markets, products and services and the best up-to–date applications. Risks are managed in accordance with pre-approved policies by the board of directors. The risk management department identifies, evaluates and covers financial risks, in close collaboration with the bank’s various operating units. The board of directors provides written rules which cover certain risk areas, such as credit risk, foreign exchange risk, interest rate risk and the use of derivative and non-derivative financial instruments. Moreover, the risk department is responsible for the periodic review of risk management and the control environment independently. Risk management strategy The Bank operates in business lines, which generate a range of risks whose frequency, severity and volatility can be of different and significant magnitudes. A greater ability to calibrate its risk appetite and risk parameters, the development of risk management core competencies, as well as the implementation of a high-performance and efficient risk management structure are therefore critical undertakings for bank. Thus, the primary objectives of the bank’s risk management framework are: › To contribute to the development of the Bank in various business lines to reach an ideal level of general risk. › To guarantee the bank’s sustainability as a going concern, through the implementation of a high-quality risk management infrastructure. In defining the bank’s overall risk appetite, the bank management takes various considerations and variables into account, including: › The relative balance between risk and reward of the bank’s various activities. › Earnings sensitivity to business, credit and economic cycles. › The aim of achieving a well-balanced portfolio of earnings streams. Risk management governance and risk principles Bank’s risk management governance is based on: › Strong managerial involvement, throughout the entire organization, starting from the Board of Directors down to operational field management teams. › A tight framework of internal procedures and guidelines; › Continuous supervision by business lines and support functions as well as by an independent body to monitor risks and to enforce rules and procedures. Within the board, the Risk and Audit Committees are more specifically responsible for examining the consistency of the internal framework for monitoring risks and compliance.
62 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Risk categories The following are part of the risks associated with Bank’s Banking activities: a- Credit risk:
(Including country risk): represents risk of losses arising from the inability of the Bank’s customers, sovereign issuers or other counterparties to meet their financial Report Strategic commitments. Credit risk also includes the replacement risk linked to market transactions. In addition, credit risk may be further increased by a concentration risk, which arises either from large individual exposures or from groups of counterparties with a high default probability. b- Market risk: Represents risk of loss resulting from changes in market prices and interest rates. c- Operational risk: (Including legal, compliance, accounting, environmental, reputational risks, etc.): represents risk of loss or fraud or of producing inaccurate financial and accounting data due to inadequacies or failures in procedures and internal systems, human error or external events. Additionally, operational risks may also take the form of com- pliance risk, which is the risk of the bank incurring either legal, administrative or disciplinary sanctions or financial losses due to failure to comply with relevant rules and regulations. Performance Operational d- Structural interest and exchange rate risk: Represents risk of loss or of residual depreciation in the bank’s balance sheet and off-balance sheet assets arising from changes in interest or exchange rates. Struc- tural interest and exchange rate risk arises from banking commercial activities and on Corporate Center transactions (operations on equities, investments and bond issues). e- Liquidity risk: Represents the risk that bank might not be able to meet its obligations as they become due. The Bank dedicates significant resources to constantly adapting its risk management to its activities and ensures that its risk management framework operates in full compliance with the following fundamental principles of: Corporate Social Social Corporate Responsibility › Full independence of risk assessment departments from the operating divisions; and › Consistent approach to risk assessment and monitoring applied throughout the bank. The Risk Division is independent from the bank’s operating entities and reports directly to general management. Its role is to contribute to the development and profitability of the bank by ensuring that the risk management framework in place is both robust and effective. It employs various teams specializing in the operational management of credit and market risk. More specifically, the Risk Division: Defines and approves the methods used to analyze, assess, approve and monitor credit risks, country risks, market risks and operational risks; conducts a critical review of commercial strategies in high risk areas and continually seeks to improve such risk forecasting and management; Risk Management Risk
Contributes to independent assessment by analyzing transactions implying a credit risk and by providing guidance on transactions proposed by sales managers; and Governance Identifying a frame for all Bank’s operational risks. Corporate Corporate The Assets and Liabilities Unit under the Finance Division, for its part, is entrusted with assessing and managing other major types of risks, namely liquidity and structural risks (resulting from interest rate, exchange rate and liquidity) as well as the bank’s long term financing, management of capital requirements and equity structure. The Internal Legal Counsel deals with compliance and legal risks. Responsibility for devising the relevant risk management structure and defining risk management operating principles lies mainly with both the Risk Division and, in particular fields, the assets and liabilities management under Finance Division. The Bank’s Risk Committee is in charge of reviewing all the bank’s key risk management issues and meets at least on quarterly basis. Risk Committee’s monthly meet- ings involve members of the Executive Committee, the heads of the business lines and the Risk Division managers and are used to review all the core strategic issues: Financial Separate
risk-taking policies, assessment methods, material and human resources, analysis of credit portfolios and of the cost of risk, market and credit concentration limits (by Statements product, country, sector, region, etc.). On the other hand, the Assets and Liabilities management committee (ALCO) is competent for matters relating to funding and liquidity policy making and planning. All new products and activities or products under development must be submitted to the New Product Committee. This New Product Committee aims at ensuring that, prior to the launch of a new activity or product, all associated risks are fully understood, measured, approved and subject to adequate procedures and controls, using the available information and processing systems. Operational risks, permanent control and audit (periodic) control process are supervised by the Audit and Accounts Committee that meets on a quarterly basis. Finally, the Bank’s risk management principles, procedures and infrastructures and their implementation are monitored by the Internal Audit team and the External Auditors.
(A) CREDIT RISKS Consolidated Statements The Bank is exposed to the credit risk which is the risk resulting from failure of the client to meet its contractual obligations towards the bank. The credit risk is consid- Financial ered to be the most significant risk for the bank, therefore requiring careful management. The credit risk manifests itself in the lending activities and debt instruments in bank’s assets as well as off balance sheet financial instruments, such as letters of credit and letters of guarantee. (A/1) Credit risk management: organization and structure Maintaining comprehensive and efficient management and monitoring of credit risk – which constitutes the bank’s primary source of risk – is vital to preserving bank financial strength and profitability. As a result, the bank implements a tight credit risk control framework, whose cornerstone is the Credit Risk Policy and Authorities defined jointly by the Risk Division and the Business Lines, and is subject ot periodic review and approval by the Board of Directors. Within the Risk Division, persons are responsible for: Branches Network Branches › Setting credit limits by customer, customer group or transaction type; › Approving credit score or internal customer rating criteria; › Monitoring and surveillance of large exposures and various credit portfolios; and › Reviewing specific and general provisioning policies.
QNB ALAHLI Annual Report 2020 — 63 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
In addition, comprehensive portfolio analysis is performed in order to provide guidance to the General Management on the bank’s overall credit risk exposure as well as reporting to Risk Committee. The Risk Division also helps define criteria for measuring risk and defining appropriate provisioning practices. Risk approval Embedded in bank’s credit policy is the concept that approval of any credit risk undertaking must be based on sound knowledge of the client and a thorough understand- ing of the client’s business, the purpose, nature and structure of the transaction and the sources of repayment, while bearing in mind the bank’s risk strategy and risk appetite. The risk approval process is based on four core principles: › All transactions involving replacement risk must be pre-authorized, replacement risk is bearing a loss when a bank is forced to replace a contract in case of breach- ing the original party’s contract (debtor risk, non-settlement or non-delivery risk and issuer risk). › Staff assessing credit risk is fully independent from the decision-making process. › Subject to relevant credit delegations, responsibility for analyzing and approving risk lies with the most appropriate business line or credit risk unit, which reviews all authorization requests relating to a specific client or client group, to ensure a consistent approach to risk management. › All credit decisions systematically include internal obligor risk ratings, as proposed by business lines and vetted by the Risk Division and approved by concerned Credit Committee. Risk management and audit Changes in the quality of outstanding commitments are reviewed on a periodic basis and at least once a quarter, as part of the “sensitive names” and provisioning pro- cedures. This review is based on analyses performed by the business divisions and the risk function. Furthermore, the Internal Audit also carries out file reviews or risk audits in the bank’s branch groups and reports its findings to the General Management. Replacement risk Replacement risk provides the measurement of the replacement cost of a transaction in the event of default by the original counterparty and the necessity to close the ensuing position with counterparty; hence, the replacement cost is the result of the market price between the date on which the original transaction is entered into and the default date. Transactions giving rise to replacement risk include interest rate swaps and forward FX deals. Replacement risk management The Bank places great emphasis on carefully monitoring its replacement risk exposure in order to minimize its losses in case of default of its counterparties and counter- party limits are, therefore, assigned to all trading counterparties, irrespective of their status (bank, other financial institution, corporate and public institutions). (A/2) Risk measurement and internal ratings Bank rating system is based on three key pillars: › The internal ratings models used to measure and quantify counterparty risk. › A set of procedures defining guidelines for devising and using ratings (scope, frequency of rating revision, procedure for approving ratings, etc.). › Reliance on human judgment to improve modeling results to include elements outside the scope of rating model. Credit risk rating is supported by a set of procedures ensuring reliable, consistent and timely default and loss data detection. Rating models are reviewed and developed when necessary. The Bank regularly evaluates performance of credit rating models and their capacity to predict default cases. The calculations used to measure and monitor replacement risk include: › Current Average Risk (CAR) is a calculation of the Average risk of all the future scenarios, excluding the negative scenarios, i.e., when the replacement makes a gain. › Credit value at risk (VAR) is a calculation of the largest loss that would be incurred in 99% of cases. Following are some risk mitigations methods: Collaterals The Bank designs several policies and controls for credit risk mitigation such as collaterals for funds provided. The Bank lays down guidelines for specific categories of the accepted collaterals. The main types of collaterals for Loans and credit facilities to customers are: • Real estate mortgage; • Pledge on business assets like machinery and merchandise; • Pledge in financial instruments like debt instruments and equity. The long term financing and lending for companies are often collaterized while credit facilities for persons are not collaterized. The Bank attempts to mitigate the credit risk through additional collaterals from the concerned parties immediately on arising of impairment indicators for any of the loans or facilities. Collaterals taken to secure assets other than Loans and credit facilities are identified according to the nature of the instrument. Debit instruments and treasury bills are often not collaterized. Derivatives The Bank exercise prudential strict control procedures on net open positions of derivatives. i.e. the difference between sale and purchase agreements at the level of value and duration. The amount exposed to credit risk at any time is determined at fair value of the instrument that may achieve benefit to the bank. i.e. any assets with high positive fair value which represents insignificant part of contractual imputed value used to reflect the volume of existing instruments. This credit risk is managed as part of overall lending limit granted to the customer together with the potential risk as a result of market changes. The Bank doesn’t obtain collaterals for credit risk related to such instruments except for the amounts requested by the bank as marginal deposits from other parties.
64 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/3) Provisioning policy (Measurement of expected credit losses) The Group’s policies require the identification of three stages of classifying financial assets measured at amortized cost, loan commitments and financial guarantees as well as debt instruments at fair value through other comprehensive income in accordance with changes in credit quality since initial recognition and thereafter measur- ing the impairment losses (expected credit losses) as follows: Strategic Report Strategic The un-impaired financial asset is classified at initial recognition in the first stage and credit risk is monitored continuously by the Bank’s credit risk management. In the case of a significant increase in credit risk since the initial recognition, the financial asset is transferred to the second stage and the financial asset is not consid- ered at this stage (the expected credit loss over the life of the asset without impairment). In case of indications of impairment of the financial asset, it is transferred to the third stage. The Group relies on the following indicators to determine whether there is objective evidence of impairment: – A significant increase in the rate of return on the financial asset as a result of increased credit risk. – Significant negative changes in the activity and financial or economic conditions in which the borrower operates. – Scheduling request as a result of difficulties facing the borrower. Performance – Significant negative changes in actual or expected operating results or cash flows. Operational – Future economic changes affecting the borrower’s future cash flows. – Early indicators of cash flow / liquidity problems such as delays in servicing creditors / business loans. – Cancellation of a direct facility by the bank due to the high credit risk of the borrower. The following table illustrates the proportional distribution of loans and credit facilities reported in the financial position for each of the four internal ratings of the Bank and their relevant impairment losses:
December 31, 2020 December 31, 2019 Corporate Social Social Corporate Loans and credit facilities Allowance for impairment loss Loans and credit facilities Allowance for impairment loss Responsibility
Good debts 87.68% 14.11% 90.46% 15.81%
Normal watch-list 6.68% 15.76% 5.31% 11.62%
Special watch-list 2.91% 27.53% 1.73% 25.91%
Non performing loans 2.73% 42.60% 2.50% 46.66%
100% 100% 100% 100%
(A/4) General Model for Measurements of Banking Risks: Management Risk In addition to the four categories of the bank’s internal credit ratings indicated above, management classifies Loans and credit facilities based on more detailed sub- and Governance groups in accordance with the CBE requirements. Corporate Assets exposed to credit risk in these categories are classified according to detailed rules and terms depending heavily on information relevant to the customer, his activity, financial position and his repayment track record. The Group calculates the allowances required for impairment of assets exposed to credit risk, including commitments relating to credit on the basis of rates determined by CBE. In case, the allowance required for impairment losses as per CBE credit worthiness rules exceeds the provisions as required by the expected credit loss, that ex- cess shall be debited to retained earnings and carried to the general banking risk reserve in the equity section. Such reserve is always adjusted, on a regular basis, by any increase or decrease so that the reserve shall always be equivalent to the amount of increase between the two provisions. Such reserve is not available for distribution; note (37) shows the movement (if any) on the general banking risk reserve during the financial year.
Below is a statement of credit rating for corporations as per the Bank’s internal ratings compared with those of CBE’s; it also includes the percentages of provisions Financial Separate required for impairment of assets exposed to credit risk. Statements
Required Provision CBE rating Description Internal Rating Internal Description According to % ORR
1 Low risk 0% 1 Good debts
2 Moderate risks 1% 1 Good debts
3 Satisfactory risks 1% 1 Good debts
4 Appropriate risks 2% 1 Good debts Consolidated Statements
5 Acceptable risks 2% 1 Good debts Financial
6 Marginally acceptable risks 3% 2 Normal watch-list
7 Watch-list 5% 3 Special watch-list
8 Substandard debts 20% 4 Non-performing loans
9 Doubtful debts 50% 4 Non-performing loans
10 Bad debts 100% 4 Non-performing loans Branches Network Branches
QNB ALAHLI Annual Report 2020 — 65 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/5) Maximum limit for credit risk before collaterals
Financial position items exposed to credit risks December 31, 2020 December 31, 2019
Treasury bills 41,990,573,212 46,181,998,997
Loans and credit facilities to customers
Retail loans
Overdrafts 3,444,193,377 3,433,826,947
Credit cards 1,056,199,108 975,503,290
Personal loans 25,174,858,319 19,979,405,278
Real estate loans 2,114,526,363 1,743,041,205
Corporate loans
Overdrafts 65,738,632,301 64,762,938,685
Direct loans 45,557,308,735 41,248,664,431
Syndicated Loans and facilities 19,064,953,752 19,111,959,605
Other loans 2,908,740,897 3,666,135,060
Segregated interest , unearned discount & deferred income (97,346,369) (137,461,128)
Financial derivatives 106,092,208 83,458,859
Financial investments
Debt instrument 47,923,406,672 41,609,730,965
Other Financial assets 2,889,443,277 2,545,652,465
Total 257,871,581,852 245,204,854,659
The following table provides information on the quality of financial assets during the year:
December 31, 2020
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 845,339,886 117,484,768 - 962,824,654
Normal watch-list 3,737,172,764 534,408,719 - 4,271,581,483
Special watch-list - - - -
Non performing loan - - - -
4,582,512,650 651,893,487 - 5,234,406,137
Allowance for impairment losses (10,607,678) - - (10,607,678)
Carrying amount 4,571,904,972 651,893,487 - 5,223,798,459
December 31, 2019
Due from banks Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 978,370,746 146,348,168 - 1,124,718,914
Normal watch-list 5,078,070,791 445,464,192 - 5,523,534,983
Special watch-list - - - -
Non performing loan - - - -
6,056,441,537 591,812,360 - 6,648,253,897
Allowance for impairment losses (9,125,361) - - (9,125,361)
Carrying amount 6,047,316,176 591,812,360 - 6,639,128,536
66 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time Strategic Report Strategic
Credit rating
Good debts - - - -
Normal watch-list 42,008,511,859 - - 42,008,511,859
Special watch-list - - - -
Non performing loan - - - -
42,008,511,859 - - 42,008,511,859
Allowance for impairment losses (17,938,647) - - (17,938,647)
Carrying amount 41,990,573,212 - - 41,990,573,212 Performance Operational
December 31, 2019
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts - - - - Corporate Social Social Corporate
Normal watch-list 46,196,437,796 - - 46,196,437,796 Responsibility
Special watch-list - - - -
Non performing loan - - - -
46,196,437,796 - - 46,196,437,796
Allowance for impairment losses (14,438,799) - - (14,438,799)
Carrying amount 46,181,998,997 - - 46,181,998,997 Risk Management Risk December 31, 2020 and Governance
Retail loans Stage 1 Stage 2 Stage 3 Total Corporate
12-Months Life time Life time
Credit rating
Good debts 29,940,799,324 - - 29,940,799,324
Normal watch-list 1,722,005,621 - - 1,722,005,621
Special watch-list - 385,422,772 - 385,422,772
Non performing loan - - 406,037,696 406,037,696 Financial Separate
31,662,804,945 385,422,772 406,037,696 32,454,265,413 Statements
Allowance for impairment losses (232,464,951) (100,481,753) (331,541,542) (664,488,246)
Carrying amount 31,430,339,994 284,941,019 74,496,154 31,789,777,167
December 31, 2019
Retail loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating Consolidated Statements Financial Good debts 24,484,169,185 - - 24,484,169,185
Normal watch-list 1,385,271,936 - - 1,385,271,936
Special watch-list - 310,867,666 - 310,867,666
Non performing loan - - 383,915,910 383,915,910
25,869,441,121 310,867,666 383,915,910 26,564,224,697
Allowance for impairment losses (146,580,951) (14,987,231) (270,879,795) (432,447,977) Branches Network Branches Carrying amount 25,722,860,170 295,880,435 113,036,115 26,131,776,720
QNB ALAHLI Annual Report 2020 — 67 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 121,475,991,399 1,241,689,552 - 122,717,680,951
Normal watch-list 2,687,586,297 7,227,603,103 - 9,915,189,400
Special watch-list - 4,686,416,139 - 4,686,416,139
Non performing loan - - 4,354,568,361 4,354,568,361
124,163,577,696 13,155,708,794 4,354,568,361 141,673,854,851
Allowance for impairment losses (1,326,847,640) (3,545,247,660) (3,532,123,866) (8,404,219,166)
Carrying amount 122,836,730,056 9,610,461,134 822,444,495 133,269,635,685
December 31, 20129
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 121,125,081,837 1,070,390,607 - 122,195,472,444
Normal watch-list 2,396,744,678 4,822,760,827 - 7,219,505,505
Special watch-list - 2,497,533,088 - 2,497,533,088
Non performing loan - - 3,669,238,188 3,669,238,188
123,521,826,515 8,390,684,522 3,669,238,188 135,581,749,225
Allowance for impairment losses (1,184,670,265) (2,507,154,392) (3,100,226,787) (6,792,051,444)
Carrying amount 122,337,156,250 5,883,530,130 569,011,401 128,789,697,781
December 31, 2020
Debt instruments at fair value through other comprehensive Stage 1 Stage 2 Stage 3 Total income
12-Months Life time Life time
Credit rating
Good debts 1,454,586,525 - - 1,454,586,525
Normal watch-list - 400,000,000 - 400,000,000
Special watch-list - - - -
Non performing loan - - - -
1,454,586,525 400,000,000 - 1,854,586,525
Allowance for impairment losses (116,187) - - (116,187)
Carrying amount - fair value 1,454,586,525 400,000,000 - 1,854,586,525
December 31, 2019
Debt instruments at fair value through other comprehensive Stage 1 Stage 2 Stage 3 Total income
12-Months Life time Life time
Credit rating
Good debts 1,635,837,477 - - 1,635,837,477
Normal watch-list - - - -
Special watch-list - - - -
Non performing loan - - - -
1,635,837,477 - - 1,635,837,477
Allowance for impairment losses (86,639) - - (86,639)
Carrying amount - fair value 1,635,837,477 - - 1,635,837,477
68 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Debt instruments at amortized Stage 1 Stage 2 Stage 3 Total cost Strategic Report Strategic 12-Months Life time Life time
Credit rating
Good debts - - - -
Normal watch-list 46,071,608,107 - - 46,071,608,107
Special watch-list - - - -
Non performing loan - - - -
46,071,608,107 - - 46,071,608,107
Allowance for impairment losses (2,787,960) - - (2,787,960) Performance Operational Carrying amount 46,068,820,147 - - 46,068,820,147
December 31, 2019
Debt instruments at amortized
Stage 1 Stage 2 Stage 3 Total Social Corporate
cost Responsibility
12-Months Life time Life time
Credit rating
Good debts - - - -
Normal watch-list 39,987,394,104 - - 39,987,394,104
Special watch-list - - - -
Non performing loan - - - -
39,987,394,104 - - 39,987,394,104 Management Risk Governance and and Governance Allowance for impairment losses (13,500,616) - - (13,500,616) Corporate Corporate
Carrying amount 39,973,893,488 - - 39,973,893,488
The following table shows changes in impairment credit losses between the beginning and ending of the year as a result of these factors:
December 31, 2020 Financial Separate
Due from banks Stage 1 Stage 2 Stage 3 Total Statements
12-Months Life time Life time
Allowance for impairment losses 9,125,361 - - 9,125,361 at January 01, 2020
New financial assets purchased 10,607,678 - - 10,607,678 or issued
Financial assets have been matured (9,125,361) - - (9,125,361) or derecognised
Transfer to stage 1 - - - - Consolidated Statements
Transfer to stage 2 - - - - Financial
Transfer to stage 3 - - - -
Changes in the probability of failure - - - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology Branches Network Branches Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 10,607,678 - - 10,607,678
QNB ALAHLI Annual Report 2020 — 69 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2019
Due from banks Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses 19,083,244 - - 19,083,244 at January 01, 2019
New financial assets purchased 9,125,361 - - 9,125,361 or issued
Financial assets have been matured (19,083,244) - - (19,083,244) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure - - - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 9,125,361 - - 9,125,361
The following table shows changes in impairment credit losses between the beginning and ending of the year as a result of these factors:
December 31, 2020
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses at 14,438,799 - - 14,438,799 January 01, 2020
New financial assets purchased 17,938,647 - - 17,938,647 or issued
Financial assets have been matured (14,438,799) - - (14,438,799) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure - - - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 17,938,647 - - 17,938,647
70 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2019
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time Strategic Report Strategic
Allowance for impairment losses at 30,548,616 - - 30,548,616 January 01, 2019
New financial assets purchased 14,438,799 - - 14,438,799 or issued
Financial assets have been matured (30,548,616) - - (30,548,616) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - - Performance Transfer to stage 3 - - - - Operational
Changes in the probability of failure - - - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - Corporate Social Social Corporate
differences Responsibility
Balance at the end of the year 14,438,799 - - 14,438,799
December 31, 2020
Retail loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses 146,580,951 14,987,231 270,879,795 432,447,977 Risk Management Risk
at January 01, 2020 and Governance
Net impairment loss recognized 85,884,000 76,079,777 71,123,633 233,087,410 Corporate during the year
Loans written-off during the year - - (10,457,191) (10,457,191)
Collections of loans previously - 9,414,745 - 9,414,745 written-off
Foreign exchange translation - - (4,695) (4,695) differences
Balance at the end of the year 232,464,951 100,481,753 331,541,542 664,488,246 Financial Separate Statements
December 31, 2019
Retail loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses 52,573,588 2,303,028 426,697,861 481,574,477 at January 01, 2019
Net impairment loss recognized 94,007,363 5,288,334 10,256,089 109,551,786 during the year Consolidated Statements
Loans written-off during the year - - (166,045,747) (166,045,747) Financial
Collections of loans previously - 7,395,869 - 7,395,869 written-off
Foreign exchange translation - - (28,408) (28,408) differences
Balance at the end of the year 146,580,951 14,987,231 270,879,795 432,447,977 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 71 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses 1,184,670,265 2,507,154,392 3,100,226,787 6,792,051,444 at January 01, 2020
New financial assets purchased 433,972,978 1,365,852,789 - 1,799,825,767 or issued
Financial assets have been matured (244,065,477) (1,098,012,888) (153,369,947) (1,495,448,312) or derecognised
Transfer to stage 1 1,645,389 (1,645,389) - -
Transfer to stage 2 (867,216,184) 867,216,184 - -
Transfer to stage 3 (108,964,469) (174,273,545) 283,238,014 -
Changes in the probability of failure 926,805,138 78,244,368 567,666,225 1,572,715,731 and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - (66,421) (273,591,305) (273,657,726)
Collections of loans previously - 9,155,116 - 9,155,116 written-off
Foreign exchange translation - (8,376,946) 7,954,092 (422,854) differences
Balance at the end of the year 1,326,847,640 3,545,247,660 3,532,123,866 8,404,219,166
December 31, 2019
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses 1,294,842,414 2,562,255,289 2,531,716,332 6,388,814,035 at January 01, 2019
New financial assets purchased 154,201,368 1,007,169,569 - 1,161,370,937 or issued
Financial assets have been matured (323,698,647) (1,168,030,814) - (1,491,729,461) or derecognised
Transfer to stage 1 1,085,880 (1,085,880) - -
Transfer to stage 2 (34,339,561) 34,339,561 - -
Transfer to stage 3 (1,103,912) (83,368,566) 84,472,478 -
Changes in the probability of failure 93,682,723 187,463,359 645,139,836 926,285,918 and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - (67,406,595) (67,406,595)
Collections of loans previously - 18,059,660 - 18,059,660 written-off
Foreign exchange translation - (49,647,786) (93,695,264) (143,343,050) differences
Balance at the end of the year 1,184,670,265 2,507,154,392 3,100,226,787 6,792,051,444
72 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Debt instruments at fair value through other comprehensive Stage 1 Stage 2 Stage 3 Total
income Report Strategic
12-Months Life time Life time
Allowance for impairment losses 86,639 - - 86,639 at January 01, 2020
New financial assets purchased - - - - or issued
Financial assets have been matured (2,667) - - (2,667) or derecognised
Transfer to stage 1 - - - - Performance Transfer to stage 2 - - - - Operational
Transfer to stage 3 - - - -
Changes in the probability of failure 32,215 - - 32,215 and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - - Corporate Social Social Corporate Responsibility Foreign exchange translation - - - - differences
Balance at the end of the year 116,187 - - 116,187
December 31, 2019
Debt instruments at fair value
through other comprehensive Stage 1 Stage 2 Stage 3 Total Management Risk Governance and and Governance income Corporate Corporate 12-Months Life time Life time
Allowance for impairment losses 116,133 - - 116,133 at January 01, 2019
New financial assets purchased 5,913 - - 5,913 or issued
Financial assets have been matured (9,421) - - (9,421) or derecognised Separate Financial Separate Transfer to stage 1 - - - - Statements Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure (25,986) - - (25,986) and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - - Consolidated Foreign exchange translation - - - - Statements Financial differences
Balance at the end of the year 86,639 - - 86,639 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 73 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Debt instruments at amortized Stage 1 Stage 2 Stage 3 Total cost
12-Months Life time Life time
Allowance for impairment losses 13,500,616 13,500,616 at January 01, 2020
New financial assets purchased - - - - or issued
Financial assets have been matured - - - - or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - -
Transfer to stage 3 - -
Changes in the probability of failure (10,712,656) (10,712,656) and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 2,787,960 - - 2,787,960
December 31, 2019
Debt instruments at amortized Stage 1 Stage 2 Stage 3 Total cost
12-Months Life time Life time
Allowance for impairment losses 4,619,649 4,619,649 at January 01, 2019
New financial assets purchased 13,500,616 - - 13,500,616 or issued
Financial assets have been matured (4,619,649) - - (4,619,649) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - -
Transfer to stage 3 - -
Changes in the probability of failure - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 13,500,616 - - 13,500,616
74 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Off balance sheet items exposed December 31, 2020 December 31, 2019 to credit risks Strategic Report Strategic Financial guarantees 317,500 357,500
L/Cs 2,225,958,932 3,679,975,387
Accepted papers 1,797,703,754 3,300,687,075
L/Gs 40,570,756,871 42,590,274,614
Other contingent liabilities 19,632,824 367,558,187
Total 44,614,369,881 49,938,852,763 Performance Operational Commitments for credit facilities have a carrying amount of 32,855,532,909 at the end of current reporting year against EGP 35,961,879,563 in the prior year. The preceding table shows the maximum limit exposure to risks at the end of December 2020 and December, 2019 without taking into consideration collaterals held by the bank, if any. For financial position items, amounts stated depend on the net carrying amount shown in the financial position. The preceding table related to financial position items exposed to credit risks shows that 64% of the maximum limit exposed to credit risk at the end of current reporting year is attributable to loans and credit facilities to customers against 63% at the end of the prior year, investments in debt instruments constitute 19% against 17% at the end of the prior year and treasury bills constitute 16% against 19% at the end of the prior year. The management is confident of its ability to maintain control on an ongoing basis and maintain the minimum credit risk resulting from loan portfolio, facilities, and debt instruments based on the following facts: Corporate Social Social Corporate 94% of the loans and credit facilities portfolio at the end of the current reporting year comprises loans and credit facilities classified at the top 2 categories of the inter- Responsibility nal rating against 96% at the end of the prior year. 96% of the loan and credit facilities portfolio at the end of the current reporting year does not have arrears or indicators of impairment against 96% at the end of the prior year. “Loans and credit facilities that are individually assessed for impairment (Stage 3) at the end of the current reporting year have a carrying amount of EGP 4,760,606,057 . Impairment on these loans and credit facilities represents 81% of their carrying amount. Loans and credit facilities, that are individually assessed for impairment at the end of the prior year had a carrying amount of EGP 4,053,154,098 and their impairment represents 83% of such carrying amount.” “The Bank applied more prudential selection process on granting loans and credit facilities during the current reporting year ended December 31, 2020.” Risk Management Risk Governance and and Governance 98% of investments in debt instruments and treasury bills at the end of the current reporting year comprise local sovereign debt instruments against 98% at the end of the prior year. Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 75 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/6) Loans and credit facilities Balances of loans and credit facilities in terms of credit risk rating are analyzed below:
December 31, 2020 December 31, 2019
Loans and credit facilities to Loans and credit facilities to Loans and credit facilities to Loans and credit facilities to customers banks customers banks
Neither have arrears nor impaired 167,127,005,315 - 155,690,924,639 -
Have arrears but not impaired 2,240,508,892 - 2,401,895,185 -
Impaired 4,760,606,057 - 4,053,154,098 -
Total 174,128,120,264 - 162,145,973,922 -
Less: Allowance for impairment (9,068,707,412) - (7,224,499,421) - losses
Less: Segregated interest (330,085) - (5,850,387) -
Less: Unearned discount & deferred (97,016,284) - (131,610,741) - income
Net 164,962,066,483 - 154,784,013,373 -
Total credit allowance for loans and credit facilities at the end of the current reporting year amounted to EGP 9,068,707,412 (EGP 7,224,499,421 at the end of the prior year) of which EGP 3,863,665,408 represent impairment in stage three (EGP 3,371,106,582 at the end of the prior year) and EGP 5,205,042,004 represent impairment for stage one and stage two in the credit portfolio (EGP 3,853,392,839 at the end of the prior year). Note (20-A) includes additional information on the allowance for impairment losses for Loans and credit facilities to customers during the current reporting year. During the current accounting year, the loans and credit facilities portfolio increase by 7% due to the increase on lending activity. Loans and credit facilities which do not have arrears and are not subject to impairment The credit quality of Loans and credit facilities that not subject to impairment is assessed by reference to the bank’s internal rating. Loans and credit facilities to customers December 31, 2020
Retail
Rating Overdrafts Credit cards Personal loans Real estate loans Total
Good debts 3,446,431,018 902,049,238 23,635,785,228 1,956,533,840 29,940,799,324
Normal watch-list 42,845 - - - 42,845
Special watch-list 164,133 - - - 164,133
Total 3,446,637,996 902,049,238 23,635,785,228 1,956,533,840 29,941,006,302
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Good debts 62,258,563,406 39,015,148,618 18,420,181,364 2,930,064,781 122,623,958,169
Normal watch-list 3,674,727,366 5,538,043,512 694,867,162 - 9,907,638,040
Special watch-list 1,331,847,052 2,748,760,845 573,794,907 - 4,654,402,804
Total 67,265,137,824 47,301,952,975 19,688,843,433 2,930,064,781 137,185,999,013
Guaranteed loans are not considered subject to impairment for the non-performing category after taking into consideration the collectability of the guarantees.
December 31, 2019
Retail
Rating Overdrafts Credit cards Personal loans Real estate loans Total
Good debts 3,450,187,264 846,011,295 18,597,924,787 1,590,045,837 24,484,169,183
Normal watch-list 388,176 - - - 388,176
Special watch-list 123,322 - - - 123,322
Total 3,450,698,762 846,011,295 18,597,924,787 1,590,045,837 24,484,680,681
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Good debts 62,745,050,872 36,918,222,424 18,732,595,710 3,652,854,319 122,048,723,325
Normal watch-list 3,093,093,351 3,666,076,797 408,316,057 36,895,450 7,204,381,655
Special watch-list 166,366,570 1,786,772,408 - - 1,953,138,978
Total 66,004,510,793 42,371,071,629 19,140,911,767 3,689,749,769 131,206,243,958
Guaranteed loans are not considered subject to impairment for the non-performing category after taking into consideration the collectability of the guarantees.
76 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Loans and credit facilities which have arrears but are not subject to impairment These are loans and credit facilities with past-due installments but are not subject to impairment, unless information has otherwise indicated. Loans and credit facilities to customers which have arrears but are not subject to impairment are analyzed below. Strategic Report Strategic December 31, 2020
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Up to 30 days - 123,084,194 1,354,893,464 134,231,339 1,612,208,997
More than 30 – 60 days - 28,602,521 218,452,027 29,919,116 276,973,664
More than 60 – 90 days - 21,227,865 172,338,722 24,472,168 218,038,755
Total - 172,914,580 1,745,684,213 188,622,623 2,107,221,416 Performance Operational Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Up to 30 days - 95,587,735 - - 95,587,735
More than 30 – 60 days - 24,742,361 - - 24,742,361
More than 60 – 90 days - 12,957,380 - - 12,957,380
Total - 133,287,476 - - 133,287,476 Corporate Social Social Corporate Responsibility
December 31, 2019
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Up to 30 days - 94,226,249 1,158,825,914 131,831,597 1,384,883,760
More than 30 – 60 days - 25,373,887 154,895,434 14,578,370 194,847,691 Risk Management Risk
More than 60 – 90 days - 8,945,942 96,720,986 10,229,727 115,896,655 and Governance
Total - 128,546,078 1,410,442,334 156,639,694 1,695,628,106 Corporate
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Up to 30 days - 121,337,753 - - 121,337,753
More than 30 – 60 days - 39,038,295 - - 39,038,295 Separate Financial Separate More than 60 – 90 days - 7,922,114 - - 7,922,114 Statements More than 90 days - - 537,968,917 - 537,968,917
Total - 168,298,162 537,968,917 - 706,267,079
Past due loans and credit facilities are those amounts, or any part thereof, which have fallen due but for which no payment has been received in accordance with the contractual terms. These include arrears for periods more than one day. Amounts shown in the note represent the whole balance of the loan or facility and not only the past due amounts. These do not include the remaining loans and credit facilities of the same customer so long default has not fully or partially occurred on those loans. On initial recognition of Loans and credit facilities, the fair value of collaterals, if any, is assessed based on valuation methods used for similar assets but are not recog- Consolidated
nized in the financial statements since these do not represent assets of the bank at that date. In subsequent periods, the fair value is updated to reflect the market price Statements or prices for similar assets. Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 77 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Loans and credit facilities which are individually impaired Loans and credit facilities to customers At the end of the current reporting year the carrying amount of loans and credit facilities, that are assessed to be individually impaired (Stage 3) excluding any cash flows expected to arise from the associated guarantees, amounted to EGP 4,760,606,057 against EGP 4,053,154,098 at the end of the prior year. The following table provides a breakdown of the balance of such loans and credit facilities which are individually impaired including the fair value of the collaterals shall prevail when calculating the provisions.
December 31, 2020
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Loans which are individually 52,499,267 40,819,367 297,870,882 14,848,179 406,037,695 impaired
Fair value of collaterals - 6,686,662 46,503,363 960,226 54,150,251
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Loans which are individually 569,445,574 3,784,612,953 509,835 - 4,354,568,362 impaired
Fair value of collaterals - - - - -
December 31, 2019
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Loans which are individually 49,384,349 20,037,400 291,449,626 23,044,535 383,915,910 impaired
Fair value of collaterals - 6,985,795 86,093,496 9,801,766 102,881,057
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Loans which are individually 378,456,031 3,290,262,295 519,862 - 3,669,238,188 impaired
Fair value of collaterals - - - - -
Restructured loans and facilities: The Bank applies different types of restructuring policies to its loans and credit facilities, which include extending payment terms, executing forced management pro- grammes and applying prepayment and extension provisions to the loan. The applied restructuring policies depend on factors or criteria that indicate, in management judgment that the counterparty’s continuous payment of the loan is unlikely to occur in the absence of such restructuring policies that are subject to ongoing review. Within the bank renegotiated outstanding loans relate to long-term loans made to any type of clientele (retail and corporate loans clients). Total renegotiated loans amounted to EGP 1,821,876,913 at the end of the current reporting year against EGP 735,628,769 at the end of the prior year. These balances do not include any amounts whose commercial terms were renegotiated to preserve the quality of the bank’s relationship with its clients, including those terms pertaining to loans interest rates and/or loans repayment periods . The Bank practice calls for most clients whose loans have been renegotiated to be maintained in the “non-performing” category, as long as the bank remains uncertain of their ability to meet their future commitments in accordance with the definition of default under Basel II. Loans and credit facilities to customers
Corporate loans December 31, 2020 December 31, 2019
Overdrafts 53,456,549 14,813,140
Direct loans 1,768,420,364 720,815,629
Total 1,821,876,913 735,628,769
(A/7) Debt instruments, treasury bills, and other governmental notes The following table shows a breakdown of debt instruments, treasury bills, and other governmental notes (excluding allowances for impairment) per last rating for Standard and Poor’s and its equivalent:
Rating December 31, 2020 December 31, 2019
Egyptian Treasury Bills B 42,008,511,859 46,196,437,796
Fair value through other comprehensive income
Other debt instruments unrated 400,000,000 -
US Treasury Bonds AA+ 1,454,586,525 1,635,837,477
Amortized cost
Egyptian Treasury Bonds B 46,071,608,107 39,987,394,104
Total 89,934,706,491 87,819,669,377
78 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/8) Acquisition of collaterals During the prior reporting year, the Bank acquire foreclosed asset as acquisition of guarantees as following:
Nature of the asset Book Value Report Strategic
Building 7,300,000
Assets acquired were classified under other Assets in the financial position. Such Assets shall be sold, if practical.
(A/9) Concentration of risks of financial assets exposed to credit risks (Geographical segments) The following table provides a breakdown of the gross amount of the most significant credit risk limits to which the bank is exposed at the end of the current reporting year (excluding allowances for impairment). The gross amount of all financial assets including loans and credit facilities is segmented into the geographical regions of the bank’s clients except for investments in foreign treasury bonds which are reported in the “other countries” category. Performance
Operational
Arab Republic of Egypt "Other Red Sea & Upper Total Total Great Cairo Alex Delta countries" Egypt
Treasury bills 42,008,511,859 - - - 42,008,511,859 - 42,008,511,859
Loans and credit facilities to cus- tomers
Retail loans Social Corporate Responsibility
Overdrafts 2,201,833,700 1,091,106,998 117,694,319 88,502,246 3,499,137,263 - 3,499,137,263
Credit cards 826,528,798 133,062,623 107,531,069 48,660,695 1,115,783,185 - 1,115,783,185
Personal loans 17,951,708,102 2,756,975,372 3,869,898,789 1,100,758,060 25,679,340,323 - 25,679,340,323
Real estate loans 1,653,518,330 127,272,939 168,896,048 210,317,325 2,160,004,642 - 2,160,004,642
Corporate loans
Overdrafts 50,701,122,132 8,724,308,102 5,406,874,039 3,002,279,125 67,834,583,398 - 67,834,583,398
Direct loans 34,326,114,434 7,261,140,807 7,372,766,761 2,259,831,402 51,219,853,404 - 51,219,853,404 Management Risk Governance and and Governance Syndicated loans and 17,619,667,308 302,420,783 1,589,181,289 178,083,888 19,689,353,268 - 19,689,353,268 Corporate facilities
Other loans 2,924,756,971 5,307,810 - - 2,930,064,781 - 2,930,064,781
Financial derivatives - - - - - 106,092,208 106,092,208
Financial invest- ments
Debt instruments 46,471,608,107 - - - 46,471,608,107 1,454,586,525 47,926,194,632
Other financial Financial Separate 2,688,499,049 81,202,523 73,726,567 23,180,482 2,866,608,621 26,737,080 2,893,345,701 assets Statements Total at the end of 219,373,868,790 20,482,797,957 18,706,568,881 6,911,613,223 265,474,848,851 1,587,415,813 267,062,264,664 the current year
Total at the end of the comparative 210,043,137,861 18,218,219,447 16,676,697,552 5,914,408,466 250,852,463,326 1,746,439,982 252,598,903,308 year Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 79 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(Business segments) The following table provides a breakdown of the gross amount of the most significant credit risk limits to which the bank is exposed at the end of the current reporting year (excluding allowances for impairment). The gross amount of all financial assets is segmented into business sectors in which the bank’s clients operate.
Agricultural Industrial "Trading "Service "Governmental Foreign Gov- "Other Individuals Total entities entities entities" entities" sector" ernments activities"
Treasury bills - - - - 42,008,511,859 - - - 42,008,511,859
Loans and credit facilities to customers
Retail loans
Overdrafts ------3,499,137,263 3,499,137,263
Credit cards ------1,115,783,185 1,115,783,185
Personal loans ------25,679,340,323 25,679,340,323
Real estate ------2,160,004,642 2,160,004,642 loans
Corporate loans
Overdrafts 964,424,958 29,472,924,980 12,720,062,710 24,677,170,750 - - - - 67,834,583,398
Direct loans 909,348,790 29,978,328,282 8,552,073,526 11,780,102,806 - - - - 51,219,853,404
Syndicated loans and 38,435,752 17,489,624,053 318,039,212 1,843,254,251 - - - - 19,689,353,268 facilities
Other loans - 1,961,118,251 13,804,883 220,617,853 - - 734,523,794 - 2,930,064,781
Financial deriv------106,092,208 - 106,092,208 atives
Financial investments
Debt instru- - - - 400,000,000 46,071,608,107 1,454,586,525 - - 47,926,194,632 ments
Other financial 7,140,100 294,616,335 80,668,245 163,713,842 2,203,146,078 22,878,403 - 121,182,698 2,893,345,701 assets
Total at the end 1,919,349,600 79,196,611,901 21,684,648,576 39,084,859,502 90,283,266,044 1,477,464,928 840,616,002 32,575,448,111 267,062,264,664 of current year
Total at the end of the compar- 1,934,419,135 74,628,013,567 20,240,013,070 37,725,820,901 87,947,993,288 1,661,609,086 1,771,011,814 26,690,022,447 252,598,903,308 ative year
80 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(B) Market Risk Market risk is the risk of losses resulting from unfavorable changes in market parameters. It contains all trading book transactions as well as some banking book portfo- lios valued using the mark-to-market approach. The bank’s policy on market risk transactions is “Prudent” in that:
Report Strategic – Products subject to “market risk” which are offered by the Bank to its customers are restricted to cash and simple financial derivatives such as interest rate swaps and foreign exchange swap and forward contracts. – The only trading activity conducted by the Bank is over-night foreign exchange position, within a prudent limit that cannot be exceeded.
– Open positions must be centrally managed and matched.
The front-office managers assume primary responsibility in terms of risk exposure; however, management lies with an independent structure being the Market Risk Controller (MRC), within Risk Division. The main function of MRC is the ongoing analysis, independently from the trading rooms, of the positions and risks linked to the
market activities of the bank and the comparison of these positions to the allowed limits. The MRC carries out the following functions: Performance Operational
– Daily and periodic analysis and reporting (independently from the front office) of the exposures, stress tests and risks incurred by the bank’s market activities and comparison of said exposure and risks with the pre-set limits. – Definition of the risk-measurement methods and control procedures, approval of the valuation methods used to calculate and monitor risks, including those made on a gross or nominal basis. – Management of the approval process for limits. Corporate Social Social Corporate
– Reviewing new products or services from market risk aspect under New Product Committee to ensure that market risks are properly identified and controlled. Responsibility At the proposal of this MRC and Head of Risk Division, the board sets the levels of authorized risk by type of market activity and makes the main decisions concerning bank’s market risk management. (B/1) Methods of Measuring Market Risk and Defining Exposure Limits As a part of managing market risk, the Bank has several hedging strategies and enters into interest rate swaps to balance the risks inherent in debt instruments and fixed rate long term loans, if the fair value option is applied. The Bank uses a lot of methods to control market risk such as stress testing “ST”. Stress testing gives indicator of the loss volume expected that may arise from sharp adverse circumstances. Stress testing is designed to match business using standard analysis for specific scenarios. The Bank sets set a maximum limit of expected losses of 10% from authorized limit according to internal bank rules. (B/2) Stress test for foreign exchange risk Risk Management Risk The following table provides FX position (whether short or long) for all balance sheet items and off balance sheet items. and Governance Corporate Corporate Currency Short/Long FX positions FX short positions FX long positions Expected loss at 10%
USD 89,304,301 - 89,304,301 8,930,430
EUR 6,196,551 - 6,196,551 619,655
GBP 364,317 - 364,317 36,432
JPY 21,567 - 21,567 2,157
CHF 51,348 - 51,348 5,135
DKK 79,427 - 79,427 7,943 Financial Separate
NOK )1,100( )1,100( - )110( Statements
SEK 32,897 - 32,897 3,290
CAD 73,534 - 73,534 7,353
AUD 9,033 - 9,033 903
AED )225,789( )225,789( - )22,579(
BHD 11,171 - 11,171 1,117
KWD 112,129 - 112,129 11,213
OMR 57,357 - 57,357 5,736 Consolidated QAR 144,194 - 144,194 14,419 Statements Financial
SAR )103,490( )103,490( - )10,349(
CNY 16,818 - 16,818 1,682
EGP )96,144,265( )96,144,265( - -
Maximum expected loss at December 31, 2020 9,614,427
Maximum expected loss at December 31, 2019 11,417,312 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 81 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(B/3) Foreign exchange rate volatility risk (concentration of FX risk on financial instruments) The Bank is exposed to foreign exchange rate volatility risk in terms of the financial position and cash flows. The board of directors set limits for foreign exchange risk at the total value of positions at the end of the day and during the day when timely control is exercised. The following table summarizes the bank’s exposure to the risks of fluctuations in foreign exchange rates at the end of the reporting year. This table includes the carrying amounts of the financial instruments in terms of their relevant currencies and in EGP equivalent.
EGP USD Euro GBP Other currencies Total
Financial assets
Cash and due from banks & Central Bank 16,462,452,981 5,421,246,426 252,966,614 110,610,795 143,376,010 22,390,652,826 of Egypt
Treasury bills 37,552,131,231 4,438,441,981 - - - 41,990,573,212
Loans and credit facili- 134,967,783,584 26,866,116,252 3,089,402,790 38,710,288 53,569 164,962,066,483 ties to customers
Financial derivatives - 106,092,208 - - - 106,092,208
Financial investments 46,107,658,745 2,505,994,124 1,238,572 - - 48,614,891,441
Other financial assets 2,847,506,523 38,497,114 3,272,224 5,972 161,444 2,889,443,277
Total financial assets 237,937,533,064 39,376,388,105 3,346,880,200 149,327,055 143,591,023 280,953,719,447
Financial liabilities
Due to banks 3,967,354,400 125,348,501 17,971,278 27,175,694 986,085 4,138,835,958
Customer deposits 196,955,202,316 31,853,466,530 4,476,939,941 444,694,688 161,805,555 233,892,109,030
Financial derivatives 54,698,875 - - - - 54,698,875
Other loans 146,887,957 2,963,337,128 141,515,482 - - 3,251,740,567
Other financial liabilities 972,517,846 67,961,953 1,752,090 182,723 674 1,042,415,286
Total financial lia- 202,096,661,394 35,010,114,112 4,638,178,791 472,053,105 162,792,314 242,379,799,716 bilities
Net financial position 35,840,871,670 4,366,273,993 (1,291,298,591) (322,726,050) (19,201,291) 38,573,919,731
At the end of the com- parative year
Total financial assets 217,391,435,902 43,746,535,833 3,142,852,430 330,975,755 134,733,772 264,746,533,692
Total financial lia- 186,455,480,909 38,936,562,128 4,673,521,800 468,995,962 148,826,176 230,683,386,975 bilities
Net financial position 30,935,954,993 4,809,973,705 (1,530,669,370) (138,020,207) (14,092,404) 34,063,146,717
(B/4) Structural Interest Rate Risk Structural interest rate risk is linked to commercial activities and corporate center transactions. Structural interest rate risk arises from residual gaps (surplus or deficit) of the bank’s fixed-rate positions. The general principle is to reduce structural interest rate risk to the maximum extent. Whenever possible, commercial operations are hedged against interest rate, either through micro-hedging (individual hedging of each commercial transaction) or mac- ro-hedging techniques (hedging of portfolios of similar commercial transactions within the treasury department). Consequently, structural interest rate risk only results from the residual positions remaining after hedging. The absence of interest rate derivative market in Egyptian Pound makes it difficult to hedge positions in this currency. Organization of the management of Structural Interest Rate risks Identification and measurement of the risk is carried out by the Assets & Liabilities Management Unit (ALMU) which comes under the authority of the Bank’s finance department. Risk assessment, limits and corrective actions are decided by the Assets & Liabilities Management Committee (ALCO) headed by the Chairman with the participation of the Managing Directors, the Chief Financial Officer and the Commercial Divisions Heads, the Branch Network Head, the General Secretary and the Head of the Dealing Room. Execution of the necessary actions decided by the ALCO for the rectification of the gaps is carried out by the dealing room through the financial market. Progress is reported and notified to the ALMU/ALCO. Assets & Liabilities Management Committee (ALCO) duties – Decide on the limits for the sensitivity. – Review, validate and approve any assumptions used for the identification and measurements of the respective risks. – Review interest rate Gap and sensitivity position reported through ALMU. – Assess, amend and approve recommendations for bringing the Gap (if any) within the previously approved limits. Assets & Liabilities Management Unit (ALMU) duties – Document and maintain the respective risks management policy as approved by the ALCO. – Construct and continuously elaborate on the models used for the identification and measurement of the respective risks. – Report to ALCO on the respective exposures and the evolution of such exposures over time. – Provide recommendations for bringing the gaps within limits. – Follow up and notify ALCO of the progress made in the implementation of the ALCO decisions.
82 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Dealing Room duties – Provide frequent updates on markets movements. – Execute and Report progress of ALCO approved recommendations. Strategic Report Strategic – Co-ordinate with ALMU on the spontaneous hedging of special transactions according to ALCO approved policy and recommendations. Bank’s Objective of Interest Rate Risk Management The Bank’s aim is to reduce exposure to structural interest rate risk as much as possible. Any residual interest rate risk exposure must comply with the sensitivity limits approved by the ALCO. Sensitivity is defined as the variation in the net present value of future residual fixed-rate positions for a 1% parallel increase in the yield curve. Adherence to applicable limits is closely monitored. Measurement and monitoring of structural interest rate risks In order to quantify the Bank’s exposure to structural interest rate risks, all fixed rate assets and liabilities on future maturities are analyzed to identify any gaps. On a quarterly basis, assets and liabilities are analyzed independently, without any prior matching. Maturities on outstanding positions are determined on the basis of the contractual terms of the transactions and models of historic client behavior (e.g. saving accounts) as well as conventional assumptions for some balance sheet
items (e.g. equity). Performance Operational Once the gaps have been identified for each major currency, the sensitivity is calculated as the variation of the net present value of the fixed rate position of an instan- taneous parallel shift of the 1% in the yield curve of each major currency. The cumulative sensitivity for all currencies as well as for any single currency should not exceed the above mentioned limit. The following table summarizes the extent to which the bank is exposed to the risks of fluctuations in the interest rate including the carrying amount of the financial instruments distributed on the basis of the rate prevailing in re-pricing dates or maturity dates, whichever is earlier.
More than one More than 3 At the end of the More than one year Up to one month month up to 3 months up to one More than 5 years Interest free Total current year up to 5 years months year Corporate Social Social Corporate Financial assets Responsibility
Cash and due from Central Bank of Egypt - - - - - 17,166,854,367 17,166,854,367 (CBE)
Due from banks 1,036,406,195 3,687,793,025 - - - 499,599,239 5,223,798,459
Treasury bills 4,136,216,652 11,421,700,805 26,432,655,755 - - - 41,990,573,212
Loans and credit facili- 127,828,918,646 5,705,623,612 8,935,712,650 18,225,758,027 4,266,053,548 - 164,962,066,483 ties to customers Risk Management Risk Governance and and Governance Financial derivatives - - - - - 106,092,208 106,092,208 Corporate Corporate Financial investments
Fair value through other 400,000,004 306,394,937 - 197,169,426 951,022,158 619,795,827 2,474,382,352 comprehensive income
Amortized cost 11,718,808 2,645,120,273 4,657,129,983 32,134,551,261 6,620,299,822 - 46,068,820,147
Fair value through profit - - - - - 71,688,942 71,688,942 or loss
Other financial assets
- - - - - 2,889,443,277 2,889,443,277 Financial Separate
Total financial assets
133,413,260,305 23,766,632,652 40,025,498,388 50,557,478,714 11,837,375,528 21,353,473,860 280,953,719,447 Statements
IRS (notional amount) 1,699,066,809 322,508,049 322,508,049 2,204,460,506 - - 4,548,543,413
Financial liabilities
Due to banks 3,898,193,466 - - - - 240,642,492 4,138,835,958
Customer deposits 99,017,523,477 29,764,629,022 29,174,970,507 40,525,020,676 59,332,025 35,350,633,323 233,892,109,030
Financial derivatives - - - - - 54,698,875 54,698,875
Other loans 3,105,652,611 18,488,889 31,462,766 96,136,301 - - 3,251,740,567
Other financial liabilities - - - - - 1,042,415,286 1,042,415,286 Consolidated Statements
Total financial lia- Financial 106,021,369,554 29,783,117,911 29,206,433,273 40,621,156,977 59,332,025 36,688,389,976 242,379,799,716 bilities
IRS (notional amount) 4,548,543,413 - - - - - 4,548,543,413
Re-pricing gap 24,542,414,147 (5,693,977,210) 11,141,573,164 12,140,782,243 11,778,043,503 (15,334,916,116) 38,573,919,731
At the end of the com- parative year Branches Network Branches Total financial assets 126,231,728,228 19,456,903,658 49,655,162,000 39,997,593,000 13,296,434,000 16,108,712,806 264,746,533,692
IRS (notional amount) - 208,538,688 208,540,000 4,637,999,000 - - 5,055,077,688
Total financial lia- 124,539,855,216 25,707,981,000 19,841,623,000 28,197,859,000 155,518,000 32,240,550,759 230,683,386,975 bilities
IRS (notional amount) 5,055,077,688 - - - - - 5,055,077,688
Re-pricing gap (3,363,204,676) (6,042,538,654) 30,022,079,000 16,437,733,000 13,140,916,000 (16,131,837,953) 34,063,146,717
QNB ALAHLI Annual Report 2020 — 83 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(C) Liquidity Risk Liquidity risk is defined as the risk of not being able to meet cash flow or collateral requirements when they fall due and at a reasonable price. The Bank manages this exposure through modeling of its cash flow under several scenarios. Organization of Liquidity Risk Management Identification and measurement of the risk is carried out by the Assets & Liabilities Management Unit (ALMU) which comes under the authority of the bank’s Finance Department. Risk assessment and corrective actions are decided by the Assets & Liabilities Management Committee (ALCO) headed by the Chairman with the participation of the Managing Directors, the Chief Financial Officer and the Commercial Divisions Heads, the Branch Network Head, the General Secretary and the Head of the Dealing Room. Execution of the necessary actions decided by the ALCO for the rectification of the gaps is carried out by the dealing room and/or the business lines. Progress is reported and notified to the ALMU/ALCO. Assets & Liabilities Management Committee (ALCO) duties – Review, validate and approve any assumptions and scenarios used for the identification and measurements of the respective risks. – Review the structured liquidity Gap reported by ALMU. – Assess, amend and approve recommendations for funding strategy and/or the portfolio composition for the remedy of the gaps. Assets & Liabilities Management Unit (ALMU) duties – Document and maintain the respective risks’ management policy as approved by the ALCO. – Construct and continuously elaborate on the models used for the identification and measurement of the respective risks. – Report to ALCO on the respective exposures and the evolution of such exposures over time. – Follow up and notify ALCO of the progress made in the implementation of the ALCO decisions. – Co-ordinate with the various business lines for funding needs and report potential impact on the liquidity gap. – Test and advice on the potential impact of any new product offering on the structured liquidity positions. Dealing Room duties – Is responsible for managing short term liquidity. – Provide frequent updates on markets’ status and alerting signals of liquidity stretches. – Execute and Report progress of ALCO approved recommendations. – Communicate their funding needs to ALMU for the construction of the liquidity gap. Bank’s Objective of Liquidity Risk Management The Bank’s objective is to finance its activities at the best possible rates under normal conditions and to ensure it can meet its obligations in the event of a crisis. To this end, the main principles of the bank’s liquidity management are as follows: – Management of the short-term liquidity in accordance with The regulatory framework. – Diversification of funding sources. – Maintenance of a portfolio of liquid assets. Measurement and monitoring of structural liquidity risks The Bank’s liquidity management framework comprises the following processes: – Regular assessment of the bank structural liquidity profile and its development over time; – Monitoring of the diversification of funding sources. – Assessment of the bank’s funding needs on the basis of the budget forecasts in order to plan appropriate funding solutions. Liquidity gaps are constructed by listing the respective on and off-balance sheet-items according to the currency of denomination and residual maturity. Maturities on outstanding assets and liabilities are determined on the basis of the contractual terms of transactions, models of historic client behavior patterns (e.g. savings accounts) as well as conventional assumptions relating to certain balance sheet items (e.g. equity). Liquidity risk Liquidity risk represents difficulty encountering the bank in meeting its financial commitments upon maturity and refurbishing amounts withdrawn. This may results in failure in fulfilling obligations related to depositors and meeting lending commitments.
84 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
More than one month More than 3 months up More than one year up Contractual maturities Up to one month More than 5 years Total up to 3 months to one year to 5 years Strategic Report Strategic Financial liabilities
Due to banks 4,153,277,342 - - - - 4,153,277,342
Customer deposits 123,534,969,312 31,152,351,636 42,762,652,843 50,381,453,725 75,459,881 247,906,887,397
Other loans 296,863,460 26,745,321 355,362,612 2,664,617,406 - 3,343,588,799
Total financial 127,985,110,114 31,179,096,957 43,118,015,455 53,046,071,131 75,459,881 255,403,753,538 liabilities
› All balances shown in the table above represent the undiscounted cash flows; therefore, it is not possible to match these figures with the corresponding items in the statement of financial position. Performance › The spot foreign exchange rate and interest rate prevailing at that date are used in the above table. Operational
December 31, 2019
More than one month More than 3 months up More than one year up Contractual maturities Up to one month More than 5 years Total up to 3 months to one year to 5 years
Financial liabilities
Due to banks 16,050,840,383 - - - - 16,050,840,383
Customer deposits 121,228,681,498 25,210,980,000 25,089,002,000 48,806,977,000 174,957,000 220,510,597,498 Corporate Social Social Corporate
Other loans 672,599,676 580,953,797 1,726,768,157 1,660,718,770 15,000,156 4,656,040,556 Responsibility
Total financial 137,952,121,557 25,791,933,797 26,815,770,157 50,467,695,770 189,957,156 241,217,478,437 liabilities
› All balances shown in the table above represent the undiscounted cash flows; therefore, it is not possible to match these figures with the corresponding items in the statement of financial position. › The spot foreign exchange rate and interest rate prevailing at that date are used in the above table. Assets available to meet all liabilities and cover loan commitments include cash, balances with Central Banks, due from banks, treasury bills, other governmental notes and Loans and credit facilities to banks and clients. Maturity term of percentage of loans to clients that are maturing within a year is extended in the normal course of Risk Management Risk
the bank’s business. Moreover, some debt instruments, treasury bills and other governmental notes are pledged to cover liabilities. The Bank has the ability to meet and Governance unexpected net cash flows through selling securities, and finding other financing sources. Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 85 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Cash flow derivatives Derivatives settled on a gross-basis The Bank is a party to derivative contracts that are settled on a gross-basis, in particular foreign exchange derivatives. The following table shows derivative financial liabilities that shall be settled in gross distributed over the remaining periods of contractual maturities at the balance sheet date. The amounts shown in the table repre- sent the undiscounted cash flows.
December 31, 2020
Maturities for statement of More than one month More than 3 months More than one year up Up to one month More than 5 years Total financial position items up to 3 months up to one year to 5 years
Held for trading derivatives
Foreign exchange derivatives
Cash outflows 1,793,319,151 385,649,070 1,080,225,845 - - 3,259,194,066
Cash inflows 1,787,213,672 375,195,229 1,002,865,756 - - 3,165,274,657
December 31, 2019
Maturities for statement of More than one month More than 3 months More than one year up Up to one month More than 5 years Total financial position items up to 3 months up to one year to 5 years
Held for trading derivatives
Foreign exchange derivatives
Cash outflows 1,473,159,499 649,907,775 1,057,615,772 - - 3,180,683,046
Cash inflows 1,472,146,050 640,968,390 969,969,010 - - 3,083,083,450
Cash flow for Off-balance sheet items
December 31, 2020
More than one year and less Maturities for off-balance sheet items Less than one year More than 5 years Total than 5 years
Financial guarantees 317,500 - - 317,500
Operating lease commitments 127,355,381 393,504,249 100,460,794 621,320,424
Capital commitments resulting from acquisition of property 997,688,233 - - 997,688,233 and equipment
Total 1,125,361,114 393,504,249 100,460,794 1,619,326,157
More than one year and less Less than one year More than 5 years Total than 5 years
Commitments for credit facilities 29,820,313,141 3,030,870,953 4,348,815 32,855,532,909
December 31, 2019
More than one year and less Maturities for off-balance sheet items Less than one year More than 5 years Total than 5 years
Financial guarantees 357,500 - - 357,500
Operating lease commitments 95,093,222 275,023,904 66,162,524 436,279,650
Capital commitments resulting from acquisition of property 956,533,263 - - 956,533,263 and equipment
Total 1,051,983,985 275,023,904 66,162,524 1,393,170,413
More than one year and less Less than one year More than 5 years Total than 5 years
Commitments for credit facilities 31,566,856,019 4,395,023,422 122 35,961,879,563
86 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(D) Fair value of financial assets and liabilities and sources of fair value (D/1) Financial instruments measured at fair value Financial assets classified as trading financial assets at fair value with changes in fair value are measured in the statement of income under ‘Net trading income’.
Debt instruments classified as financial assets at fair value through other comprehensive income are measured at fair value with changes in fair value recognized in the Report Strategic other comprehensive income statement under “fair value reserve”. For investments in equity instruments, equity securities listed on the stock exchange are measured at fair value in accordance with quoted market prices on the date of the Separate financial statements. For non-listed shares, except for strategic investments, they are evaluated in one of the accepted techniques: discounted cash flow method Multiples of value “and the inclusion of the valuation differences in other comprehensive income within the” fair value reserve “; for strategic investments, the nominal cost or value is the fair value of those investments. The table below shows the financial assets and liabilities at fair value in the Separate financial statements within the fair value hierarchy, based on the levels of inputs that are essential for measuring the fair value as a whole: Level 1: Performance The first level inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Bank can access on the measurement date. Operational Level 2: The inputs of the second level are all inputs other than quoted prices within the first level and these inputs are observable for the asset or liability, directly or indirectly. Level 3: The third level inputs are the unobservable inputs of the asset or liability.
December 31, 2020
Financial Assets Level 1 Level 2 Level 3 Total Corporate Social Social Corporate US Treasury Bonds 1,454,586,525 - - 1,454,586,525 Responsibility
Other debt instruments - 400,000,000 - 400,000,000
Funds at fair value through other comprehensive income 41,970,650 - - 41,970,650
Funds at fair value through profit or loss 71,688,942 - - 71,688,942
Equity Instruments 83,418,622 - 494,406,555 577,825,177
Financial derivatives - 106,092,208 - 106,092,208 Risk Management Risk Governance and and Governance
December 31, 2019 Corporate
Financial Assets Level 1 Level 2 Level 3 Total
US Treasury Bonds 1,635,837,477 - - 1,635,837,477
Funds at fair value through other comprehensive income 41,521,680 - - 41,521,680
Funds at fair value through profit or loss 61,678,473 - - 61,678,473
Equity Instruments 97,190,572 - 689,338,400 786,528,972
Financial derivatives - 83,458,859 - 83,458,859 Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 87 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(D/2) Financial instruments not measured at fair value The following table summarizes the carrying amount and fair value of financial assets and liabilities that are not stated in the statement of financial position at fair value:
Carrying amount Fair value
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Financial assets
Due from banks 5,223,798,459 6,639,128,536 5,223,798,459 6,639,128,536
Loans and credit facilities to customers 164,962,066,483 154,784,013,373 165,136,737,660 155,343,483,471
Financial investments at amortized Cost
Debt instruments 46,068,820,147 39,973,893,488 47,931,822,710 42,246,131,801
Financial liabilities:
Due to banks 4,138,835,958 16,030,665,382 4,138,835,958 16,030,665,382
Customer deposits 233,892,109,030 209,065,365,497 230,952,933,996 207,236,575,683
Other loans 3,251,740,567 4,574,732,377 3,251,740,567 4,574,732,377
Due from Banks: The carrying amount of variable interest rate of placements and deposits for one day represents reasonable estimate for its fair value. Fair value expected for due to banks with free interest rate is the current value. Fair value expected for deposits bearing fixed interest rate is the current value for those deposits as it is maturity is less than one year. Loans and credit facilities to customers: Loans and credit facilities are stated at the statement of financial position net of allowance for impairment losses. Debt instruments at amortized cost: The fair value of debt instruments is determined at the cost charged on the “Egyptian Treasury Bonds” according to Reuters announced at the end of the financial year. Customer deposits and due to other banks: The estimated fair value for deposits of indefinite maturity, including free-interest rate deposits, represents the amount paid on demand. (E) Capital management: For capital management purposes, the Bank’s capital includes total equity as reported in the statement of financial position plus some other elements that are managed as capital. The Bank manages its capital to ensure that the following objectives are achieved: – Compliance with the legally imposed capital requirements in Egypt. – Protecting the Bank’s ability to continue as a going concern and enabling it to generate yield for shareholders and other parties dealing with the Bank. – Maintaining a strong capital base to enhance growth of the Bank’s operations. – Capital adequacy and uses are reviewed by the Bank’s management in accordance with the requirements of the regulatory authority represented by the Central Bank of Egypt (CBE). Data is submitted and filed with the CBE on a quarterly basis. The CBE requires the bank to comply with the following; – Maintaining EGP 500 million as a minimum requirement for the issued and paid-up capital. The Bank’s paid-up capital amounted to EGP 10,774,114,830 at the end of the current year. – Maintaining a minimum level of capital adequacy ratio of 10%, calculated as the ratio between total value of the capital elements, and the risk-weighted average of the bank’s assets and contingent liabilities. Minimum level of capital adequacy ratio reached 12.75% after adding capital conservation buffer and Domestic Systemi- cally Important Banks during current year. The Bank’s capital adequacy ratio reached 21.92% at the end of the current year (December 31, 2019: 18.91%) according to Basel II.
88 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
The numerator in the capital adequacy ratio according to Basel II comprise the following 2 tiers: – Tier 1: basic capital which comprises paid-up capital (net of treasury stock), plus: retained earnings and reserves resulting from profit appropriations (other than general reserve for banking risks and special reserves), less: any goodwill previously recognized and any carried forward losses,plus:the carrying amount of other comprehensve income. Strategic Report Strategic – The interim net profit was incorporated in Tier 1 capital in accordance with the decision of Central Bank of Egypt Board of Directors held on 15 February 2017. Tier 2: subordinated capital which comprises with equivalent amount of the loans provision for debt instrument / Loans and credit facilities at stage 1 which does not exceed 1.25% from the total risk-weighted average of assets and contingent liabilities, plus: the carrying amount of subordinated loans/deposits maturing over more than 5 years (provided that such carrying amount shall be reduced by 20 % of its value in each of the last five years of their maturity), in addition to 45% from increase in fair value above the carrying amount of investments in subsidiaries and associates and 45% from special reserve. In calculating the numerator of the capital adequacy ratio, total value of Tier 2 should not exceed total value of Tier 1. Also, total value of subordinated loans (deposits) should not exceed 50 % of Tier 1. Assets are risk weighted at a range of 0 to 200%. Risk classification of these assets is based on the type of the debtor as to reflect the associated credit risk and after consideration of cash collaterals. The same treatment is applied for the off-balance sheet items which shall be adjusted to reflect the contingent nature of and potential loss on these amounts. Performance Operational Capital adequacy Standard had been prepared based on Basel II requirements, and Central Bank of Egypt Board of Directors had approved in its meeting held on Decem- ber 18, 2012, which had been issued on December 24, 2012 and in accordance with the instructions of the Central Bank of Egypt for the capital adequacy ratio (Basel II) issued during May 2019. The tables below summarizes the compositions of Tier 1, Tier 2 and the capital adequacy ratio based on Basel II:
December 31, 2019 According to Basel II December 31, 2020 Restated**
Tier 1 capital Corporate Social Social Corporate Responsibility Share capital 10,774,114,830 9,794,649,850
General reserve 15,104,078,670 16,083,543,650
Legal reserve 2,049,233,783 2,049,233,783
Other reserves 21,379,530 21,379,530
Retained earnings 3,238,881,600 3,238,981,600
Interim profit 7,301,759,859 -
General risk reserve 21,453,923 21,453,923 Risk Management Risk
Other comprehensive income 404,690,659 524,328,450 and Governance
Total deductions from capital invested (596,771,221) (642,605,412) Corporate
Total tier 1 capital 38,318,821,633 31,090,965,374
Tier 2 capital
45% from special reserve 16,761,150 16,761,150
Impairment provision for loans, debt instruments and contingent liabilities in stage one* 1,506,781,410 1,596,969,858
Total tier 2 capital 1,523,542,560 1,613,731,008
Total capital 39,842,364,193 32,704,696,382 Separate Financial Separate Risk weighted assets and contingent liabilities: Statements Credit Risk 158,727,240,641 152,904,242,645
Market Risk 15,363,994 9,060,800
Operational Risk 22,983,763,606 20,037,457,036
Total risk weighted assets and contingent liabilities 181,726,368,241 172,950,760,481
Capital adequacy ratio for Tier 1 21.09% 17.98%
Capital adequacy ratio 21.92% 18.91% Consolidated Statements * Provided it does not exceed 1.25% from total value of risk weighted assets and contingent liabilities. Financial ** After 2019 profit distribution. – Based on Separate financial statement after the disposal of insurance activity. Leverage financial ratio Central Bank of Egypt Board of Directors had approved in its meeting held on July 7, 2015 on special supervisory instructions related to leverage ratio which maintain- ing a minimum level of leverage ratio of 3% to be reported in quarterly basis to be obligatory ratio started from year 2018. This ratio will be included in Basel requirement Tier1 in order to maintain Egyptian Banking system strong and safe, as long to keep up with best international regulato- Branches Network Branches ry treatments. Leverage financial ratio reflect relationship between Tier 1 for capital that is used in capital adequacy ratio (after exclusions) and other assets (on balance sheet and off-balance sheet) that are not risk weighted assets.
QNB ALAHLI Annual Report 2020 — 89 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Ratio Elements I- The numerator elements The numerator consists of Tier 1 for capital that is used in capital adequacy ratio (after exclusions) in accordance with the requirements of the regulatory authority represented by the Central Bank of Egypt (CBE). II- The denominator elements The denominator consists of all bank assets (on balance sheet and off-balance sheet) according to financial statements called “Bank exposures” which include total the following: 1- On balance sheet items after deducting some of Tier I Exclusions for capital base. 2- Derivatives contracts exposures. 3- Financing Financial papers operations exposures. 4- Off-balance sheet items (weighted by credit conversion factor).
December 31, 2019 The tables below summarizes the leverage financial ratio: December 31, 2020 Restated*
Tier 1 capital after exclusions 38,318,821,633 31,090,965,374
Total on-balance sheet exposures, derivatives contracts and financial papers operations. 287,795,705,007 271,343,121,990
Total exposures off-balance sheet 27,144,100,711 30,628,941,430
Total exposures on-balance sheet and off-balance sheet 314,939,805,718 301,972,063,420
Leverage financial ratio 12.17% 10.30%
* After 2019 profit distribution. – Based on Separate financial statements after the disposal of insurance activity. 4- Significant accounting estimates and assumptions : In the application of the bank’s accounting policies, which are described in note 3, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these esti- mates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimate is revised, if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting year, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year. a. Impairment of Loans and credit facilities (Expected Credit Loss) The Bank reviews its Loans and credit facilities portfolio, at least, on a quarterly basis. Management uses its discretionary judgment in determining whether it is neces- sary to recognize impairment loss in the income statement. This requires it to identify any reliable evidence indicating measurable decline in the expected future cash flows from loan portfolio before identifying any decline for each individual loan. This evidence includes data indicating negative change in the ability of a portfolio of borrowers to repay the bank, or local and economic circumstances related to default. On scheduling future cash flows, the management use estimates based on previous experience related to impairment of assets having similar credit risks. Such experience refers to impairment similar to that of the portfolio in question. The methods and assumptions used in estimating both the amount and timing of the future cash flows are reviewed on a regular basis to minimize any discrepancy between the estimated loss and actual loss based on management given experience. b. Fair value of derivatives Fair value of derivative financial instruments not quoted in an active market is determined using valuation techniques. When these techniques (such as the pricing models) are used to determine fair value, periodic tests and review are performed on them using competent independent personnel other than those responsible for the preparation of such techniques. All such models have been approved and tested prior to use to ensure that their results reflect reliable data and prices that can be compared to the market. These models use market observable data only to the extent it is practical to obtain such data, however, some areas such as credit risk related to the bank and counterparties, volatility and correlations requires management judgement. Changes in assumptions about these factors can affect the fair value of the financial instrument’s disclosure. c. Debt instrument at amortized cost: Non-derivative financial assets with fixed or determinable payments and maturity dates are classified as debt instruments at amortized cost “within the business model of financial assets held to collect contractual cash flows”. If classification of investments as amortized cost – other than stakes required to be retained by the Group in accordance with the provisions of the law – were suspended by the bank, the carrying amount of the outstanding amortized cost investements at the end of the current reporting year would have increased by EGP 1,860,214,603 to reach the fair value with a corresponding increase in the fair value through other comprehensive income.
90 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
5- Segmentation analysis (5/A) Segmental analysis by activity Segment activity includes operational processes, assets used in offering banking services, management of surrounding risks and related yield. Such activity may be different from other activities. Segmentation analysis of operations according to banking activities includes: Strategic Report Strategic Corporate: This includes current account activities, deposits, overdrafts, loans, credit facilities, and financial derivatives to large, medium, and small entities. Individuals: This includes current account activities, deposits, savings, credit cards, personal loans, and real estate loans. Other businesses: They include other Banking activities such as fund management. Inter-segment activities are affected within the bank’s normal course of business. Assets and liabilities of each segment include operating assets and liabilities as shown in the bank’s balance sheet.
At the end of the current year Income and expenses according to segmen- Corporate Investments Individual Other businesses Total tal activities (December 31, 2020) Performance
Net interest income 5,406,564,184 1,159,111,981 3,771,566,018 4,016,301,162 14,353,543,345 Operational
Net fee and commission income 1,367,255,995 3,822,763 539,707,443 (63,148,356) 1,847,637,845
Dividend income - 35,584,250 - - 35,584,250
Net trading income 373,198,905 - 25,707,996 (300,145,884) 98,761,017
Gain on financial investments - 6,483,172 - - 6,483,172
Impairment credit losses (1,877,093,186) 7,183,260 (233,087,410) (1,236,056) (2,104,233,392)
Administrative expenses (1,528,517,548) (3,957,964) (2,140,302,776) 54,189,489 (3,618,588,799) Corporate Social Social Corporate
Other operating revenues (expenses) (52,995,482) 24,889,263 (207,680,166) 19,793,574 (215,992,811) Responsibility
Profit before income tax 3,688,412,868 1,233,116,725 1,755,911,105 3,725,753,929 10,403,194,627
Income tax expense (829,892,896) (277,451,263) (395,079,998) (1,502,259,830) (3,004,683,987)
Net profit for the current year 2,858,519,972 955,665,462 1,360,831,107 2,223,494,099 7,398,510,640
Assets and liabilities according to segmen- Corporate Investments Individual Other businesses Total tal activities (December 31, 2020)
Segment activity assets 133,173,954,528 91,147,573,742 31,788,111,955 18,655,624,651 274,765,264,876
Unclassified assets Management Risk - - - - 10,710,680,289 and Governance
Total assets 133,173,954,528 91,147,573,742 31,788,111,955 18,655,624,651 285,475,945,165 Corporate
Segment activity liabilities 123,064,361,062 - 110,874,549,149 7,398,474,219 241,337,384,430
Unclassified liabilities - - - - 5,685,236,378
Total liabilities 123,064,361,062 - 110,874,549,149 7,398,474,219 247,022,620,808
At the end of comparative year Income and expenses according to Corporate Investments Individuals Other businesses Total segmental activities (December 31, 2019) Separate Financial Separate Net interest income 5,989,633,789 861,115,590 3,644,514,448 3,072,706,158 13,567,969,985 Statements Net fee and commission income 1,311,493,567 8,273,246 627,674,351 55,440,611 2,002,881,775
Dividend income - 149,707,215 - - 149,707,215
Net trading income 292,490,845 - 24,639,937 (207,517,392) 109,613,390
Gain on financial investments - 6,631,154 - - 6,631,154
Impairment credit losses (595,927,394) 7,258,344 (109,551,786) 9,225,961 (688,994,875)
Administrative expenses (1,409,427,101) (3,225,291) (2,069,482,588) 65,863,547 (3,416,271,433)
Other operating revenues (expenses) (116,495,031) 46,838,956 (188,049,821) (301,108,036) (558,813,932) Consolidated Profit before income tax Statements 5,471,768,675 1,076,599,214 1,929,744,541 2,694,610,849 11,172,723,279 Financial
Income tax expense (1,228,378,879) (235,051,031) (434,396,517) (953,366,054) (2,851,192,481)
Net profit for the comparative year 4,243,389,796 841,548,183 1,495,348,024 1,741,244,795 8,321,530,798
At the end of comparative year Assets and liabilities according to Corporate Investments Individuals Other businesses Total segmental activities (December 31, 2019) Branches Network Branches Segment activity assets 128,652,358,841 89,223,568,176 26,131,654,532 14,779,018,752 258,786,600,301
Unclassified assets - - - - 10,134,361,692
Total assets 128,652,358,841 89,223,568,176 26,131,654,532 14,779,018,752 268,920,961,993
Segment activity liabilities 105,239,218,805 - 103,868,062,330 20,608,194,023 229,715,475,158
Unclassified liabilities - - - - 5,027,279,729
Total liabilities 105,239,218,805 - 103,868,062,330 20,608,194,023 234,742,754,887
QNB ALAHLI Annual Report 2020 — 91 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(5/B) Segmental analysis by geographic area At the end of current year
Income and expenses according to geographical Red Sea / segments Great Cairo Alex Delta Head ofce Total Upper Egypt (December 31, 2020)
Net interest income 6,435,053,680 1,117,858,190 932,652,562 415,998,503 5,451,980,410 14,353,543,345
Net fee and commission income 1,192,373,700 193,661,674 180,638,605 101,366,515 179,597,351 1,847,637,845
Dividend income - - - - 35,584,250 35,584,250
Net trading income 235,409,819 55,892,772 104,035,772 7,756,011 (304,333,357) 98,761,017
Gain on financial investments - - - - 6,483,172 6,483,172
Impairment credit losses (1,394,582,967) (250,414,721) (331,259,876) (133,923,032) 5,947,204 (2,104,233,392)
Administrative expenses (2,550,927,601) (469,642,950) (434,424,464) (214,031,923) 50,438,139 (3,618,588,799)
Other operating revenues (expenses) (161,749,995) (47,301,775) (37,714,490) (13,910,215) 44,683,664 (215,992,811)
Profit before income tax 3,755,576,636 600,053,190 413,928,109 163,255,859 5,470,380,833 10,403,194,627
Income tax expense (845,004,743) (135,011,968) (93,133,825) (36,732,568) (1,894,800,883) (3,004,683,987)
Net profit for the 2,910,571,893 465,041,222 320,794,284 126,523,291 3,575,579,950 7,398,510,640 current year
Assets and liabilities according to geographical Red Sea / Great Cairo Alex Delta Head ofce Total segments (December 31, 2020) Upper Egypt
Assets of geographical segments 124,378,323,216 19,760,250,380 17,759,147,218 6,628,293,258 116,718,533,511 285,244,547,583
Unclassified assets - - - - - 231,397,582
Total assets 124,378,323,216 19,760,250,380 17,759,147,218 6,628,293,258 116,718,533,511 285,475,945,165
Liabilities of geographical segments 184,224,051,914 29,213,379,696 18,394,732,412 5,373,858,065 7,428,539,642 244,634,561,729
Unclassified liabilities - - - - - 2,388,059,079
Total liabilities 184,224,051,914 29,213,379,696 18,394,732,412 5,373,858,065 7,428,539,642 247,022,620,808
At the end of comparative year Red Sea / Income and expenses according to geographical Great Cairo Alex Delta Head ofce Total Upper Egypt segments (December 31, 2019)
Net interest income 6,871,954,600 1,133,429,744 977,656,850 447,593,973 4,137,334,818 13,567,969,985
Net fee and commission income 1,153,296,612 173,627,934 172,802,867 95,767,737 407,386,625 2,002,881,775
Dividend income - - - - 149,707,215 149,707,215
Net trading income 268,407,779 38,818,590 63,553,047 10,286,016 (271,452,042) 109,613,390
Gain on financial investments - - - - 6,631,154 6,631,154
Impairment credit losses (337,064,889) (232,062,411) (124,742,991) (11,628,585) 16,504,001 (688,994,875)
Administrative expenses (2,402,501,055) (433,769,798) (429,548,965) (205,816,693) 55,365,078 (3,416,271,433)
Other operating revenues (expenses) (213,051,530) (35,839,314) (40,824,893) (34,127,564) (234,970,631) (558,813,932)
Profit before income tax 5,341,041,517 644,204,745 618,895,915 302,074,884 4,266,506,218 11,172,723,279
Income tax expense (1,202,044,610) (145,069,165) (139,349,578) (67,977,368) (1,296,751,760) (2,851,192,481)
Net profit for the comparative year 4,138,996,907 499,135,580 479,546,337 234,097,516 2,969,754,458 8,321,530,798
At the end of comparative year Red Sea / Upper Assets and liabilities according to geographical Great Cairo Alex Delta Head ofce Total Egypt segments (December 31, 2019)
Assets of geographical segments 118,931,879,965 17,702,947,372 16,056,976,028 5,763,277,378 110,208,635,398 268,663,716,141
Unclassified assets - - - - - 257,245,852
Total assets 118,931,879,965 17,702,947,372 16,056,976,028 5,763,277,378 110,208,635,398 268,920,961,993
Liabilities of geographical segments 162,240,980,105 28,086,535,998 14,931,135,008 5,568,749,741 21,677,428,638 232,504,829,490
Unclassified liabilities - - - - - 2,237,925,397
Total liabilities 162,240,980,105 28,086,535,998 14,931,135,008 5,568,749,741 21,677,428,638 234,742,754,887
Geographical segmental analysis is based on the locations of branches through which the bank provides its services.
92 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
6 - Net interest income December 31, 2020 December 31, 2019
Interest from loans and similar income:
Loans and credit facilities: Strategic Report Strategic
Customers 17,472,896,784 19,666,441,600
Total 17,472,896,784 19,666,441,600
Treasury bills and bonds 12,800,200,274 11,728,215,246
Deposits and current accounts 105,872,965 728,668,527
Net interest differential on hedging instruments (IRS contracts) 87,826,489 7,469,526
Total 30,466,796,512 32,130,794,899
Cost of deposits and similar expense :
Deposits and current accounts: Performance Operational Banks (669,827,351) (365,100,542)
Customers (15,115,975,749) (18,059,231,348)
Total (15,785,803,100) (18,424,331,890)
Repo arrangements (239,185,725) (51,471,289)
Other loans (88,264,342) (87,021,735)
Total (16,113,253,167) (18,562,824,914)
Net 14,353,543,345 13,567,969,985 Corporate Social Social Corporate Responsibility 7 - Net fee and commission income: December 31, 2020 December 31, 2019
Fee and commission income :
Credit fees and commission 1,460,301,331 1,544,790,272
Custody fees 28,535,783 29,263,782
Investment commission 22,500,009 18,947,896
Other fees 825,950,949 911,799,416
Total 2,337,288,072 2,504,801,366 Risk Management Risk
Fee and commission expense: and Governance
Brokerage fees (5,281,698) (4,793,139) Corporate
Other fees (484,368,529) (497,126,452)
Total (489,650,227) (501,919,591)
Net 1,847,637,845 2,002,881,775
8 - Dividend income December 31, 2020 December 31, 2019
Associates and subsidiaries 393,060 100,095,303
Equity instruments at fair value through other comprehensive income 35,191,190 49,611,912 Financial Separate
Total 35,584,250 149,707,215 Statements
9 - Net trading income: December 31, 2020 December 31, 2019
Forex operations:
Foreign exchange trading gains ( loss ) 114,581,674 152,527,583
Changes in fair value of currency forward contracts (7,559,832) (31,573,995)
Changes in fair value of currency swap contracts (2,427,141) (12,473,238)
Changes in fair value IRS contracts (5,833,684) 1,133,040
Total 98,761,017 109,613,390 Consolidated Statements Financial
10 - Administrative expenses December 31, 2020 December 31, 2019
Staff cost:
Salaries and wages 1,545,444,849 1,439,001,901
Social insurance 77,759,299 103,402,629
Pension cost: Branches Network Branches Defined contribution scheme 89,695,376 87,676,033
Other retirement benefits (Defined benefit scheme ) 64,340,167 66,879,618
1,777,239,691 1,696,960,181
Depreciation and amortization 331,969,579 287,647,893
Other administrative expenses 1,509,379,529 1,431,663,359
Total 3,618,588,799 3,416,271,433
QNB ALAHLI Annual Report 2020 — 93 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
11 - Other operating revenues (expenses) December 31, 2020 December 31, 2019
Foreign exchange differences from translation of foreign currency monetary assets and liabilities other (63,257,967) (382,098,408) than held for trading items and those classified as at fair value through profit or loss at initial recognition
Gain on sale of property and equipment 7,767,605 2,890,011
Software cost (182,053,571) (158,613,330)
Operating lease rental expense (127,824,094) (118,264,235)
Gain on sale of foreclosed assets reverted to the bank in settlement of debts - 736,748
Other provisions (net of reversed amounts) 127,565,295 77,765,608
Other income (expense) 21,809,921 18,769,674
Total (215,992,811) (558,813,932)
12 - Impairment credit losses December 31, 2020 December 31, 2019
Loans and credit facilities to customers (2,110,180,596) (705,479,180)
Due from banks (1,482,317) 9,957,883
Treasury bills (3,499,848) 16,109,817
Debt instruments at fair value through other comprehensive income (29,548) 29,494
Debt instruments at amortized cost 10,712,656 (8,880,967)
Other assets 246,261 (731,922)
Total (2,104,233,392) (688,994,875)
13 - Income tax expense December 31, 2020 December 31, 2019
Current tax (2,962,191,587) (2,840,585,870)
Deferred tax (42,492,400) (10,606,611)
Total (3,004,683,987) (2,851,192,481)
Additional data on deferred tax is disclosed in note 31. Income tax expense is different from the tax that would have arisen had the statutory tax rate been applied on pre-tax accounting profit as shown below:
Profit before tax 10,403,194,627 11,172,723,279
Income tax calculated at 22.5 % tax rate 2,340,718,791 2,513,862,738
Tax impact for:
Non-taxable income (48,287,748) (12,583,799)
Non-deductible expenses for tax purposes 650,050,225 328,961,068
Recognize of deferred tax assets (11,290,352) (23,267,132)
Prior-years’ tax settlements (45,937,464) -
Provision and segregated interest 73,422,345 23,671,182
Tax deductible (10% on dividend income) 3,515,790 9,941,813
Effective income tax expense 2,962,191,587 2,840,585,870
94 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Tax Position A) QNB ALAHLI Position: A-1) Corporate Tax – The Bank’s accounts were tax-inspected and settled with respect to tax since the beginning of activity till the end of December 31, 2010. Strategic Report Strategic – Years 2011 and 2012 transferred to tax dispute resolution committee. – Years 2013 till 2018 have been inspected, and the due tax was paid. – Year 2019 the Bank submitted its tax return in the due date and books have not been inspected yet. A-2) Salaries Taxes – The Bank’s books have been inspected, and the due tax was paid until year 2016. – The Company has received deemed tax claim from inception for year 2017, The company objected the deemed tax at the due date and awaiting to appeal committee. – Year 2018 under inspection from the tax authority. – Year 2019 the Bank submitted its tax return in the due date and books have not been inspected yet. Performance Operational A-3) Stamp duties – The Bank’s books have been inspected, for all branches until July 31, 2006 and all tax was paid. – Period from July 01 ,2006 till December 31, 2018 have been inspected, and the due tax was paid. – Year 2019 the Bank submitted its tax return in the due date and books have not been inspected yet. (B) EX-MIBank Position: B-1) Corporate Tax – The Bank’s accounts were tax- inspected, and settled since the beginning of activity till November 30, 2006.
B-2) Salaries Taxes Social Corporate – The Bank’s books have been inspected, and the due tax was paid till November 30, 2006. Responsibility B-3) Stamp duties – The Bank’s books have been inspected for all branches until July 31, 2006 and all due tax was paid. Period from August 01, 2006 till November 30, 2006 have been inspected, and the due tax was paid.
14- Earnings Per Share December 31, 2020 December 31, 2019
Net Profit for the year 7,398,510,640 8,321,530,798
Remuneration for the Board Members (from the year’s net profit)* (16,000,000) (16,000,000) Risk Management Risk Governance and and Governance Staff profit share (from the year’s net profit)* (739,074,304) (832,962,180) Corporate Corporate Profit available to shareholders 6,643,436,336 7,472,568,618
Weighted average number of the shares outstanding during the year 2,154,822,966 2,154,822,966
Earning Per Share 3.08 3.47
*Based on Profits distribution proposal. The actual amounts will be subject to the ordinary AGM approval. Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 95 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
15 - Classification and measurement of financial assets and financial liabilities The following table shows the gross financial assets and financial liabilities (excluding allowances for impairment) according to the business model classification:
Debt instruments at Equity instruments Financial instruments fair value through at fair value through December 31, 2020 Amortized cost at fair value through Total Carrying amount other comprehensive other comprehensive profit or loss income income
Cash and due from Central Bank of Egypt (CBE) 17,166,854,367 - - - 17,166,854,367
Due from banks 5,234,406,137 - - - 5,234,406,137
Treasury bills 42,008,511,859 - - - 42,008,511,859
Loans and credit facilities to customers 174,128,120,264 - - - 174,128,120,264
Financial derivatives - - - 106,092,208 106,092,208
Fair value through other comprehensive income - 1,854,586,525 619,795,827 - 2,474,382,352
Amortized cost 46,071,608,107 - - - 46,071,608,107
Fair value through profit or loss - - - 71,688,942 71,688,942
Other financial assets 2,893,345,701 - - - 2,893,345,701
Total financial assets 287,502,846,435 1,854,586,525 619,795,827 177,781,150 290,155,009,937
Due to banks 4,138,835,958 - - - 4,138,835,958
Customer deposits 233,892,109,030 - - - 233,892,109,030
Financial derivatives - - - 54,698,875 54,698,875
Other loans 3,251,740,567 - - - 3,251,740,567
Other financial liabilities 1,042,415,286 - - - 1,042,415,286
Total financial liabilities 242,325,100,841 - - 54,698,875 242,379,799,716
Debt instruments at Equity instruments Financial instruments fair value through at fair value through December 31, 2019 Amortized cost at fair value through Total Carrying amount other comprehensive other comprehensive profit or loss income income
Cash and due from Central Bank of Egypt (CBE) 12,012,821,372 - - - 12,012,821,372
Due from banks 6,648,253,897 - - - 6,648,253,897
Treasury bills 46,196,437,796 - - - 46,196,437,796
Loans and credit facilities to customers 162,145,973,922 - - - 162,145,973,922
Financial derivatives - - - 83,458,859 83,458,859
Fair value through other comprehensive income - 1,635,837,477 828,050,652 - 2,463,888,129
Amortized cost 39,987,394,104 - - - 39,987,394,104
Fair value through profit or loss - - - 61,678,473 61,678,473
Other financial assets 2,549,801,150 - - - 2,549,801,150
Total financial assets 269,540,682,241 1,635,837,477 828,050,652 145,137,332 272,149,707,702
Due to banks 16,030,665,382 - - - 16,030,665,382
Customer deposits 209,065,365,497 - - - 209,065,365,497
Financial derivatives - - - 44,711,902 44,711,902
Other loans 4,574,732,377 - - - 4,574,732,377
Other financial liabilities 967,911,817 - - - 967,911,817
Total financial liabilities 230,638,675,073 - - 44,711,902 230,683,386,975
96 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
16 - Cash and due from Central Bank of Egypt (CBE) December 31, 2020 December 31, 2019
Cash 3,841,120,383 3,956,390,015
Balances with CBE (mandatory reserve) 13,325,733,984 8,056,431,357 Strategic Report Strategic
Total 17,166,854,367 12,012,821,372
Interest free balances 17,166,854,367 12,012,821,372
Total 17,166,854,367 12,012,821,372
17 - Due from Banks December 31, 2020 December 31, 2019
Current accounts 649,883,412 706,011,352 Performance
Deposits 4,584,522,725 5,942,242,545 Operational
5,234,406,137 6,648,253,897
Less : Allowance for impairment losses (10,607,678) (9,125,361)
Total 5,223,798,459 6,639,128,536
Balances at CBE other than those under the mandatory reserve 3,737,172,763 5,078,070,791
Local banks 534,408,719 445,464,192
Foreign Banks 962,824,655 1,124,718,914
Less : Allowance for impairment losses (10,607,678) (9,125,361) Corporate Social Social Corporate Responsibility Total 5,223,798,459 6,639,128,536
Interest free balances 499,599,239 577,050,985
Balances at floating interest rates 150,284,173 235,660,367
Balances at fixed interest rates 4,584,522,725 5,835,542,545
Less : Allowance for impairment losses (10,607,678) (9,125,361)
Total 5,223,798,459 6,639,128,536
Current balances 5,223,798,459 6,639,128,536 Risk Management Risk
Total 5,223,798,459 6,639,128,536 and Governance Corporate Corporate Separate Financial Separate 18 - Treasury bills December 31, 2020 December 31, 2019 Statements 91 days maturity 110,025,000 749,050,000
182 days maturity 5,006,875,000 5,040,225,000
More than 182 days maturity 38,924,546,770 43,346,678,100
Less : Unearned interest (2,032,934,911) (2,939,515,304)
42,008,511,859 46,196,437,796
Less : Allowance for impairment losses (17,938,647) (14,438,799)
Total 41,990,573,212 46,181,998,997 Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 97 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020 December 31, 2019 19 - Loans and credit Allowance for Allowance for facilities to customers Total Net Total Net impairment losses impairment losses
Individuals
Overdrafts 3,499,137,263 (54,943,886) 3,444,193,377 3,500,083,111 (66,256,164) 3,433,826,947
Credit cards 1,115,783,185 (59,584,077) 1,056,199,108 994,594,773 (19,091,483) 975,503,290
Personal loans 25,679,340,323 (504,482,004) 25,174,858,319 20,299,816,747 (320,411,469) 19,979,405,278
Real estate loans 2,160,004,642 (45,478,279) 2,114,526,363 1,769,730,066 (26,688,861) 1,743,041,205
Total (1) 32,454,265,413 (664,488,246) 31,789,777,167 26,564,224,697 (432,447,977) 26,131,776,720
Corporate including small loans for businesses
Overdrafts 67,834,583,398 (2,095,951,097) 65,738,632,301 66,382,966,824 (1,620,028,139) 64,762,938,685
Direct loans 51,219,853,404 (5,662,544,669) 45,557,308,735 45,829,632,086 (4,580,967,655) 41,248,664,431
Syndicated loans and 19,689,353,268 (624,399,516) 19,064,953,752 19,679,400,546 (567,440,941) 19,111,959,605 facilities
Other loans 2,930,064,781 (21,323,884) 2,908,740,897 3,689,749,769 (23,614,709) 3,666,135,060
Total (2) 141,673,854,851 (8,404,219,166) 133,269,635,685 135,581,749,225 (6,792,051,444) 128,789,697,781
Total loans and credit facil- 174,128,120,264 (9,068,707,412) 165,059,412,852 162,145,973,922 (7,224,499,421) 154,921,474,501 ities to customers (1+2)
Less: Segregated interest (330,085) (5,850,387)
Less: Unearned discount and (97,016,284) (131,610,741) deferred income
Net Loans and credit facilities to customers 164,962,066,483 154,784,013,373 distributed as follows:
Current balances 116,421,913,243 110,591,928,373
Non-current balances 48,540,153,240 44,192,085,000
Net Loans and credit facili- 164,962,066,483 154,784,013,373 ties to customers
98 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
19-A - Allowance for impairment losses
December 31, 2020 Strategic Report Strategic Individuals Overdrafts Credit cards Personal loans Real estate loans Total
Balance at beginning of the year 66,256,164 19,091,483 320,411,469 26,688,861 432,447,977
Net impairment loss recognized during the year (11,312,278) 40,492,594 185,117,676 18,789,418 233,087,410
Loans written-off during the year - - (10,457,191) - (10,457,191)
Collection of loans previously written-off - - 9,414,745 - 9,414,745
Foreign exchange translation differences - - (4,695) - (4,695)
Balance at end of the year 54,943,886 59,584,077 504,482,004 45,478,279 664,488,246 Performance Operational Syndicated loans Corporate Overdrafts Direct loans Other loans Total and facilities
Balance at beginning of the year 1,620,028,139 4,580,967,655 567,440,941 23,614,709 6,792,051,444
Net impairment loss recognized during the year 476,023,816 1,346,364,823 56,993,902 (2,289,355) 1,877,093,186
Loans written-off during the year - (273,657,726) - - (273,657,726)
Collection of loans previously written-off - 9,155,116 - - 9,155,116
Foreign exchange translation differences (100,858) (285,199) (35,327) (1,470) (422,854) Corporate Social Social Corporate
Balance at end of the year 2,095,951,097 5,662,544,669 624,399,516 21,323,884 8,404,219,166 Responsibility
Total 9,068,707,412
December 31, 2019
Individuals Overdrafts Credit cards Personal loans Real estate loans Total
Balance at beginning of the year 57,314,838 10,097,735 269,917,078 14,098,495 351,428,146 Risk Management Risk Governance and and Governance Impact of adopting IFRS 9 30,720,193 3,513,548 91,105,836 4,806,754 130,146,331 Corporate Corporate Restated Balance at 1 January 2019 88,035,031 13,611,283 361,022,914 18,905,249 481,574,477
Net impairment loss recognized during the year 41,572,014 16,258,539 40,782,604 10,938,629 109,551,786
Loans written-off during the year (63,350,881) (10,778,339) (88,761,510) (3,155,017) (166,045,747)
Collection of loans previously written-off - - 7,395,869 - 7,395,869
Foreign exchange translation differences - - (28,408) - (28,408)
Balance at end of the year 66,256,164 19,091,483 320,411,469 26,688,861 432,447,977 Separate Financial Separate Statements Syndicated loans and Corporate Overdrafts Direct loans Other loans Total facilities
Balance at beginning of the year 1,311,185,436 3,124,058,279 817,752,554 63,292,909 5,316,289,178
Impact of adopting IFRS 9 602,021,049 470,503,808 - - 1,072,524,857
Restated Balance at 1 January 2019 1,913,206,485 3,594,562,087 817,752,554 63,292,909 6,388,814,035
Net impairment loss recognized during the year (257,824,867) 1,119,986,454 (228,262,559) (37,971,634) 595,927,394
Loans written-off during the year - (67,406,595) - - (67,406,595)
Collection of loans previously written-off - 18,059,660 - - 18,059,660 Consolidated Statements Financial Foreign exchange translation differences (35,353,479) (84,233,951) (22,049,054) (1,706,566) (143,343,050)
Balance at end of the year 1,620,028,139 4,580,967,655 567,440,941 23,614,709 6,792,051,444
Total 7,224,499,421 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 99 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020 20- Financial derivatives Notional amount Assets Liabilities
(A) Held for trading 1,929,860,563
- Forward foreign exchange contracts 1,329,333,503 - 55,211,024
- Swap foreign exchange contracts 3,259,194,066 - (512,149)
Total - 54,698,875
(B) Fair value hedge
Interest rate swap contracts 4,548,543,413 106,092,208 -
Total 4,548,543,413 106,092,208 -
Total 7,807,737,479 106,092,208 54,698,875
December 31, 2019
Notional amount Assets Liabilities
(A) Held for trading
- Forward foreign exchange contracts 2,055,051,633 - 47,651,192
- Swap foreign exchange contracts 1,125,631,413 - (2,939,290)
Total 3,180,683,046 - 44,711,902
(B) Fair value hedge
- Interest rate swap contracts 5,055,077,688 83,458,859 -
Total 5,055,077,688 83,458,859 -
Total 8,235,760,734 83,458,859 44,711,902
Forward exchange contracts represent commitments to purchase local and foreign currencies including the unexecuted part of regular-way transactions. Interest rate swap contracts represent commitments to swap fixed interest rate with variable interest rate where the physical exchange of funds is not required except in foreign ex- change swaps. The Bank’s credit risk represents the cost of potential replacement of the swaps in case other parties fail to meet their obligations. This risk is controlled on an ongoing basis in terms of fair value and percentage of contracted amounts. To control the outstanding credit risk, the Bank assesses counterparties to the contract in the same manner used in lending activities. Fair value hedge The Bank uses interest rate swap contracts to mitigate part of the risk of potential increase in fair value of its fixed rate customer deposits in foreign currencies to the extent caused by declining market interest rates. Net fair value of hedging instruments (Interest rate swap) asset amounted to EGP 106,092,208 as of December 31, 2020 (EGP 83,458,859 in the prior year). Gain result- ing from hedging instruments amounted to EGP22,633,349 (Gain of EGP 79,662,814 in the prior year) and Loss arose from the hedged items reached EGP 28,467,034 (Loss of EGP 78,529,774 in the prior year).
100 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
21- Financial investments
Fair value through other comprehensive income (FVTOCI) December 31, 2020 December 31, 2019
(A) Debt instruments at fair value: Strategic Report Strategic Listed Instruments in Egyptian Stock Exchange Market 400,000,000 -
Listed instruments in foreign stock exchange market 1,454,586,525 1,635,837,477
Total debt instruments measured at fair value through other comprehensive income 1,854,586,525 1,635,837,477
(B) Equity instruments at fair value:
Listed instruments in Egyptian stock exchange market 83,418,622 97,190,572
Unlisted instruments in stock exchange market 494,406,555 689,338,400
Total equity instruments measured at fair value through other comprehensive income 577,825,177 786,528,972 Performance Operational
(C) Money market funds and balanced funds:
Unlisted instruments in stock exchange market 41,970,650 41,521,680
Total financial investments measured at fair value through other comprehensive income (1) 2,474,382,352 2,463,888,129
Amortized cost
(A) Debt instruments: Corporate Social Social Corporate
Listed instruments in stock exchange market 45,312,836,951 39,242,973,551 Responsibility
Unlisted instruments in stock exchange market 758,771,156 744,420,553
Less : Allowance for impairment losses (2,787,960) (13,500,616)
Total Debt instruments measured at amortized cost (2) 46,068,820,147 39,973,893,488
Fair value through profit or loss (FVTPL)
(A) Mutual funds:
*Unlisted instruments in stock exchange market 71,688,942 61,678,473 Risk Management Risk Governance and and Governance Total equity instruments measured at fair value through profit or loss (3) 71,688,942 61,678,473 Corporate Corporate
(Total Financial investments (1+2+3 48,614,891,441 42,499,460,090
Current balances 8,020,364,005 6,903,439,965
Non-current balances 40,594,527,436 35,596,020,125
Total financial investment 48,614,891,441 42,499,460,090
Fixed interest debt instruments 47,523,406,672 41,609,730,965 Financial Separate
Variable interest debt instruments 400,000,000 - Statements
Total debt instruments 47,923,406,672 41,609,730,965 Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 101 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
The following table analyzes the movements on financial investments during the year:
Fair value through other Amortized cost comprehensive income
Balance at the beginning of the current year 2,463,888,129 39,973,893,488
Additions 400,000,000 12,754,736,875
Amortization of premium / discount (31,034,062) 92,497,712
Disposals (sale/redemption) (176,874,016) (6,748,527,000)
Translation differences resulting from monetary foreign currency denominated assets (31,094,318) (14,493,584)
Changes in fair value reserve (150,503,381) -
Change in Allowance for impairment during the year - 10,712,656
Balance at the end of the current year 2,474,382,352 46,068,820,147
The following table analyzes the movements on financial investments during the comparative year:
Fair value through other Amortized cost comprehensive income
Balance at the beginning of the comparative year 2,269,997,110 36,553,382,720
Impact of adopting IFRS 9 625,889,241 705,575,652
Additions 102,866,971 6,894,432,968
Amortization of premium / discount (40,834,978) 112,479,808
Disposals (sale/redemption) (301,385,348) (4,192,747,250)
Translation differences resulting from monetary foreign currency denominated assets (205,014,247) (85,729,794)
Changes in fair value reserve 24,457,233 -
Re-classification financial investements (12,087,853) -
Less : Expected credit loss (ECL) - (13,500,616)
Balance at the end of the comparative year 2,463,888,129 39,973,893,488
Gain on financial investments December 31, 2020 December 31, 2019
Gain on financial investments at fair value through profit or loss 6,483,172 6,631,154
Total 6,483,172 6,631,154
* The Bank’s equity instruments classified in the fair value through other comprehensive income category represent Bank subscribed stake at 5% from the total certifi- cates’ number of its QNB ALAHLI First Fund with cumulative daily return (THEMAR Money Market Fund) upon its initial offering, in addition to the Bank subscribed stake at 20% from the total certificates’ number of its QNB ALAHLI Second Fund with yearly / cumulative return (Tawazon Balanced Fund), in addition to the 20% from the total certificates’ number of its QNB ALAHLI Third Fund with yearly / cumulative return (Tadawol Equity Fund) upon its initial offering. All stakes required to be retained by the Bank until maturity of the funds in accordance with the provisions of the law, had a nominal value of EGP 5 million each.
102 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
22 - Investments in subsidiaries and associates The following table summarizes the Bank’s holdings in its subsidiaries and associates:
Country of Investee’s liabilities Investee’s profit The Bank’s Report Strategic December 31, 2020 Investee’s assets Investee’s revenues Carrying amount residence (excluding equity) (loss) stake
QNB ALAHLI leasing compa- Egypt 2,972,382,081 2,603,765,805 440,332,446 108,384,000 144,915,453 99.98% ny (Subsidiary)
QNBALAHLI Life Insurance Egypt 4,197,013,178 3,449,138,159 230,400,070 189,787,571 69,179,676 99.98% company (Subsidiary)
QNB ALAHLI Asset Manage- Egypt 13,505,909 439,813 1,775,125 1,169,344 1,176,710 97.48% ment Egypt (Subsidiary)
QNB ALAHLI Factoring Egypt 993,506,636 664,670,357 125,050,366 2,265,386 324,990,000 99.997% Performance
Company (Subsidiary) Operational
Senouhi Company for Construction Materials Egypt 15,463,865 4,322,738 23,415,050 (949,347) 1,847,250 23.09% (Associate)
Total 8,191,871,669 6,722,336,872 820,973,057 300,656,954 542,109,089
Country of Investee’s liabilities Investee’s profit The Bank's December 31, 2019 Investee’s assets Investee’s revenues Carrying amount residence (excluding equity) (loss) stake Corporate Social Social Corporate QNB ALAHLI leasing compa- Responsibility Egypt 3,499,721,558 2,998,989,886 462,291,479 96,531,810 144,915,453 99.98% ny (Subsidiary)
QNBALAHLI Life Insurance Egypt 3,465,874,153 2,887,561,475 202,496,131 170,011,264 69,179,676 99.98% company (Subsidiary)
QNB ALAHLI Asset Manage- Egypt 12,540,559 643,807 2,018,951 1,110,605 1,176,710 97.48% ment Egypt (Subsidiary)
QNB ALAHLI Factoring Egypt 1,250,064,566 676,683,260 255,400,833 32,774,137 324,990,000 99.997% Company (Subsidiary) Risk Management Risk
Senouhi Company for and Governance
Construction Materials Egypt 15,704,819 3,539,329 28,320,529 891,433 1,847,250 23.09% Corporate (Associate)
Total 8,243,905,655 6,567,417,757 950,527,923 301,319,249 542,109,089
23 - Intangible assets December 31, 2020 December 31, 2019
Software
Net book value at the beginning of the year 202,344,647 162,034,757 Financial Separate
Additions 53,415,565 100,163,588 Statements
Amortization (67,637,025) (59,853,698)
Net book value at the end of the year 188,123,187 202,344,647
24 - Other assets December 31, 2020 December 31, 2019
Accrued revenues 2,893,345,701 2,549,801,150
Pre-paid expenses 106,310,600 118,129,026
Advance payments for acquisition of property and equipment 709,180,654 547,060,134 Consolidated Statements Financial Foreclosed assets reverted to the bank in settlement of debts 11,469,072 13,469,072
Deposits held with others and custody 18,682,494 13,398,304
Advance payments to tax authority 12,573,164 11,921,576
Others 369,564,101 213,294,765
4,121,125,786 3,467,074,027
Less : Expected credit loss (ECL) (3,902,424) (4,148,685)
Total 4,117,223,362 3,462,925,342 Network Branches
QNB ALAHLI Annual Report 2020 — 103 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Renovations of leased Machinery & equip- 25 - Property and Equipment Lands and buildings Others Total assets ment
January 1, 2019
Cost 2,454,728,191 194,528,402 785,334,203 252,656,002 3,687,246,798
Accumulated depreciation (645,841,143) (121,044,668) (559,721,282) (124,489,537) (1,451,096,630)
Net book value 1,808,887,048 73,483,734 225,612,921 128,166,465 2,236,150,168
December 31, 2019
Net book value at the beginning of the year 1,808,887,048 73,483,734 225,612,921 128,166,465 2,236,150,168
Additions 154,652,391 61,871,240 208,711,270 24,561,101 449,796,002
Disposals from property and equipment (856,362) (139,751) (18,532,571) (1,613,603) (21,142,287)
Disposals from accumulated depreciation 517,386 139,751 18,520,055 1,613,603 20,790,795
Depreciation for the year (103,250,716) (12,133,665) (92,381,412) (20,028,402) (227,794,195)
Net book value 1,859,949,747 123,221,309 341,930,263 132,699,164 2,457,800,483
January 1, 2020
Cost 2,608,524,220 256,259,891 975,512,902 275,603,500 4,115,900,513
Accumulated depreciation (748,574,473) (133,038,582) (633,582,639) (142,904,336) (1,658,100,030)
Net book value 1,859,949,747 123,221,309 341,930,263 132,699,164 2,457,800,483
December 31, 2020
Net book value at the beginning of the year 1,859,949,747 123,221,309 341,930,263 132,699,164 2,457,800,483
Additions 121,875,572 48,704,386 136,622,271 20,547,354 327,749,583
Disposals from property and equipment (1) - (59,620) (5,857,795) (5,917,416)
Disposals from accumulated depreciation 1 - 18,670 5,620,195 5,638,866
Depreciation for the year (108,813,211) (17,359,972) (115,857,112) (22,302,259) (264,332,554)
Net book value 1,873,012,108 154,565,723 362,654,472 130,706,659 2,520,938,962
Balances at December 31, 2020
Cost 2,730,399,791 304,964,277 1,112,075,553 290,293,059 4,437,732,680
Accumulated depreciation (857,387,683) (150,398,554) (749,421,081) (159,586,400) (1,916,793,718)
Net book value 1,873,012,108 154,565,723 362,654,472 130,706,659 2,520,938,962
104 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
26 - Due to banks December 31, 2020 December 31, 2019
Current accounts 273,078,309 886,972,602
Deposits 2,317,092,762 13,499,913,543 Strategic Report Strategic
Repos transactions 1,548,664,887 1,643,779,237
Total 4,138,835,958 16,030,665,382
Central banks 1,548,664,887 1,643,779,237
Local banks 300,012,410 13,652,248,182
Foreign banks 2,290,158,661 734,637,963
Total 4,138,835,958 16,030,665,382
Non-interest bearing balances 240,642,492 770,156,843
Variable interest rate balances 32,435,817 116,815,759 Performance Operational Fixed interest rate balances 3,865,757,649 15,143,692,780
Total 4,138,835,958 16,030,665,382
Current balances 4,138,835,958 16,030,665,382
Total 4,138,835,958 16,030,665,382
27 - Customer deposits December 31, 2020 December 31, 2019
Demand deposits 51,542,070,580 47,873,048,816 Corporate Social Social Corporate Time deposits and call accounts 90,108,436,654 79,710,679,594 Responsibility
Term saving certificates 59,469,456,107 48,669,174,000
Saving deposits 25,588,901,501 25,615,535,989
Other deposits* 7,183,244,188 7,196,927,098
Total 233,892,109,030 209,065,365,497
Corporate deposits 123,017,559,881 105,197,303,167
Retail deposits 110,874,549,149 103,868,062,330
Total 233,892,109,030 209,065,365,497 Management Risk Governance and and Governance Non-interest bearing balances 35,350,633,323 30,457,770,197 Corporate Corporate
Variable interest rate balances 62,980,131,001 69,071,820,825
Fixed interest rate balances 135,561,344,706 109,535,774,475
Total 233,892,109,030 209,065,365,497
Current balances 189,559,288,122 164,765,714,497
Non-current balances 44,332,820,908 44,299,651,000
Total 233,892,109,030 209,065,365,497 Separate Financial Separate
* Other deposits include deposits covering irrevocable letters of credit in the total of EGP 354,045,866 as of December 31, 2020 (December 31, 2019 Statements EGP 256,308,432). The fair value of these deposits approximates its carrying amount.
28 - Other loans December 31, 2020 December 31, 2019
National Bank of Egypt (Epap & Eco) 910,904 2,063,889
Commercial International Bank 33,905,556 110,911,111
European Investment Bank 156,602,702 159,283,761
European Bank for Reconstruction and Development 2,947,872,338 4,184,973,616
The Micro, Small and Medium Enterprises Development Agency 112,449,067 117,500,000 Consolidated Statements
Total 3,251,740,567 4,574,732,377 Financial
Current balances 631,889,538 2,931,099,377
Non-current balances 2,619,851,029 1,643,633,000
Total 3,251,740,567 4,574,732,377 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 105 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
29 - Other liabilities December 31, 2020 December 31, 2019
Accrued interest 1,042,415,286 967,911,817
Unearned revenues 80,482,374 106,639,318
Accrued expenses 788,666,107 693,327,109
Sundry credit balances 1,385,613,532 1,021,476,088
Total 3,297,177,299 2,789,354,332
30 - Other provisions December 31, 2020
Foreign currencies Balance at the Formed during the Released during translation Used during the Balance at the end Description beginning of the year the year differences year of the year year + (-)
Provision for tax 193,870,823 - (154,990,000) - - 38,880,823 claims
Provision for legal 18,138,389 1,754,145 - (62,950) (2,460,388) 17,369,196 claims
Provision for contin- 472,545,494 26,087,839 - (18,577) - 498,614,756 gent liabilities
Provision for fidelity 32,262,862 - (417,279) (604,184) - 31,241,399
Provision for opera- 731,024 - - - (17,122) 713,902 tional risk
Total 717,548,592 27,841,984 (155,407,279) (685,711) (2,477,510) 586,820,076
December 31, 2019
Foreign currencies Balance at the Impact of adopting Formed during the Released during translation Used during the Balance at the end Description beginning of the IFRS 9 year the year differences year of the year year + (-)
Provision for tax 318,134,789 - - (120,700,000) - (3,563,966) 193,870,823 claims
Provision for legal 12,596,462 - 11,464,339 - (158,528) (5,763,884) 18,138,389 claims
Provision for contin- 290,796,573 153,241,923 31,226,616 - (2,719,618) - 472,545,494 gent liabilities
Provision for fidelity 35,918,620 - - - (3,655,758) - 32,262,862
Provision for opera- 487,587 - 243,437 - - - 731,024 tional risk
Total 657,934,031 153,241,923 42,934,392 (120,700,000) (6,533,904) (9,327,850) 717,548,592
106 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
31 - Deferred income tax Deferred tax has been calculated on all temporary tax differences using the balance sheet method and using the expected tax rate on a time that the Bank will recognize a benefit from assets / incurred liabilities at a tax rate of 22.5% for the current financial year. The Bank does not offset deferred tax assets and deferred tax liabilities unless the bank has a legally enforceable right to set off current tax assets against current tax liabilities; and if the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority. Report Strategic Deferred tax assets and liabilities Below are the balances and movements of deferred tax assets and liabilities:
Deferred tax assets Deferred tax liabilities
Tax impact on temporary differences arising from: December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Property and equipment - - (102,769,160) (91,513,775)
Provisions (other than the provision for loan impairment) 231,923,862 253,735,551 - - Performance Operational Differences in fair value of financial investments at fair value - - (99,636,192) (130,501,782) through other comprehensive income
Others 13,755,885 23,181,211 - -
Deferred tax assets (liabilities) 245,679,747 276,916,762 (202,405,352) (222,015,557)
Net balance of DTA (DTL) 43,274,395 54,901,205 Corporate Social Social Corporate Responsibility
Movement of deferred tax assets and liabilities: Deferred tax assets Deferred tax liabilities
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Beginning balance 276,916,762 234,025,024 (222,015,557) (72,605,222)
Impact of adopting IFRS 9 - 41,728,828 - (135,589,181)
DT recognized / utilized during the year (31,237,015) 1,162,910 19,610,205 (13,821,154)
Closing balance 245,679,747 276,916,762 (202,405,352) (222,015,557) Risk Management Risk Governance and and Governance Corporate Corporate Balances of deferred tax assets (liabilities) recognized directly in equity December 31, 2020 December 31, 2019
Differences in fair value of financial investments at fair value through other comprehensive income (99,636,192) (130,501,782)
Effect of changes in accounting policies - 41,728,828 Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 107 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
32 - Defined benefits obligation December 31, 2020 December 31, 2019
Amounts recognized in the statement of financial position:
Liability for post-retirement medical benefits 513,228,220 482,288,384
Amounts recognized in the income statement:
Post-retirement medical benefits 64,340,167 66,879,618
Post-retirement medical benefits obligation constitutes of:
Balances shown in the statement of financial position are represented as follows:
Present value of unfunded liabilities 365,975,012 414,628,886
Unrecognized actuarial gain 147,253,208 67,659,498
513,228,220 482,288,384
Liability movements during the year are represented as follows:
Balance at the beginning of the financial year 482,288,384 437,821,485
Current service cost 11,498,593 10,874,025
Interest cost 55,233,903 58,712,541
Actuarial losses / gain (2,392,329) (2,706,948)
Benefits paid (33,400,331) (22,412,719)
513,228,220 482,288,384
Amounts recognized in the income statement are shown below:
Current service cost 11,498,593 10,874,025
Interest cost 55,233,903 58,712,541
Actuarial losses / gain recognized during the year (2,392,329) (2,706,948)
64,340,167 66,879,618
The main actuarial assumptions used by the Bank are outlined below: December 31, 2020 December 31, 2019
Discount rate (two plans):
A- QNB ALAHLI current employees plan 14.50% 14.00%
B-Ex-MIBank retirees plan 14.50% 14.00%
QNB ALAHLI -long term increase in the cost of medical care (on top of inflation) 8.00% 10.27%
Ex-MIBank - long term increase in the cost of medical care (on top of inflation) 8.00% 10.27%
Sensitivities to +1% in discount rate (duration of the plan): Service cost DBO
Post-retirement medical benefits 7.88% 7.37%
33 - Issued and paid-up capital ( A ) Authorized Capital – The authorized capital amounts to EGP 15 billion. ( B ) Issued and Paid up Capital – The issued and paid up capital amounted to EGP 8,904,227,140 on December 31, 2017 representing 890,422,714 shares with a nominal value of EGP 10 each, of which 765,099,714 shares were paid in Egyptian pound and 125,323,000 shares were paid in foreign currency according to the exchange rates prevailing on the payment date. – The Extraordinary General Assembly held on February 15, 2018 decided to increase the capital from EGP 8,904,227,140 to EGP 9,794,649,850 ,an increase of EGP 890,422,710 by transferring from the general reserve. – The issued and paid up capital amounted to EGP 9,794,649,850 on December 31, 2018 representing 979,464,985 shares with a nominal value of EGP 10 each, of which 854,141,985 shares were paid in Egyptian pound and 125,323,000 shares were paid in foreign currency according to the exchange rates prevailing on the payment date. – The Extraordinary General Assembly held on February 28, 2019 decided to increase the capital from EGP 9,794,649,850 to EGP 10,774,114,830,an increase of EGP 979,464,980 by transferring from the general reserve. The official bodies has been approved this increase during the second quarter of Year 2020. – The Extraordinary General Assembly held on February 28, 2019 decided to split the face value of each share of the Bank’s capital from EGP 10 to be EGP 5. The issued and paid up capital amounted to EGP 10,774,114,830 on December 31, 2020 representing 2,154,822,966 shares with a nominal value of EGP 5 each.
108 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
34 - Reserves and retained earnings
(1) Reserves December 31, 2020 December 31, 2019
General reserve (a) 15,104,078,670 13,417,823,247 Strategic Report Strategic General banking risk reserve (b) 1,169,066 1,169,066
Legal reserve (c) 2,049,233,783 1,633,301,744
Fair value reserve (d) 404,806,846 524,415,089
Special reserve (e) 12,856,666 12,856,666
Capital reserve 21,379,530 18,489,519
General risk reserve* 21,453,923 21,453,923
Total reserves at the end of the year 17,614,978,484 15,629,509,254 Performance
* In piror year accordance with the instructions of the Central Bank of Egypt to apply IFRS 9 as of January 1, 2019, the special reserve - credit and general bank risk Operational reserve - credit and IFRS 9 credit risk are consolidated in one reserve under the name of general risk reserve. The difference between the provisions required under IFRS 9 and the provisions required in accordance with previous instructions will be deducted from the general risk reserve .
Reserve movements are as follows:
(a) General reserve December 31, 2020 December 31, 2019
Balance at the beginning of the financial year 13,417,823,247 8,531,087,699
Transferred from retained earnings 2,665,720,403 4,886,735,548
Transferred to capital increase (979,464,980) - Corporate Social Social Corporate Balance at the end of the year 15,104,078,670 13,417,823,247 Responsibility
(b) General banking risk reserve
Balance at the beginning of the year 1,169,066 2,781,992
Transferred to retained earnings - (1,612,926)
Balance at the end of the year 1,169,066 1,169,066
In accordance with the instructions of the Central Bank of Egypt, the general banking risk reserve is supported annually by 10% of the value of the assets owned by the Bank in return for debt if these assets are not disposed of within the period specified in the law. Risk Management Risk
December 31, 2020 December 31, 2019 and Governance
(c) Legal Reserve Corporate
Balance at the beginning of the year 1,633,301,744 1,287,748,276
Transferred from the net profit of the prior year 415,932,039 345,553,468
Balance at the end of the year 2,049,233,783 1,633,301,744
According to the provisions of local laws, 5% of net profit of the year shall be transferred to a non-distributable statutory reserve until it reaches 100% of the bank’s capital.
(d) Fair Value Reserve December 31, 2020 December 31, 2019 Financial Separate
Balance at the beginning of the year 524,415,089 (679,178,263) Statements
Impact of adopting IFRS 9 - 1,328,894,280
Deferred tax recognized as of a result of adopting IFRS 9 - (135,589,181)
Net change in fair value (Note 21) (150,503,381) 24,457,233
Impairment losses on debt instruments at fair value through other comprehensive income 29,548 (29,494)
Transferred to retained earnings - (12,087,853)
Deferred tax recognized during the year (Note 31) 30,865,590 (2,051,633)
Balance at the end of the year 404,806,846 524,415,089 Consolidated Statements (e) Special Reserve Financial The application of the CBE new basis rules of preparation and presentation of financial statements as well as the modified principles of recognition and measurement requires to restate the comparative figures of the first financial year that have been impacted by this change, including comparative figures in the balance sheet and the income statements for the previous year as the impact of adjustment is positive, such impact was carried directly to retained earnings then transferred to the special reserve in equity and shall not be used except by approval from CBE. The following is a breakdown of the items that generated the special reserve amount:
December 31, 2020 December 31, 2019
Amortized cost method using EIR for held to maturity investments 253,607 253,607
Amortized cost method using EIR for Available-for-sale investments 393,930 393,930 Branches Network Branches
Deferred tax (Tax impact on adjustment) (4,249,739) (4,249,739)
Available-for-sale investments (Equity instruments) 16,458,868 16,458,868
Total 12,856,666 12,856,666
QNB ALAHLI Annual Report 2020 — 109 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(2) Profit for the year and retained earnings December 31, 2020 December 31, 2019
Movements on retained earnings:
Balance at the beginning of the year 8,754,048,002 7,318,854,853
Impact of adopting IFRS 9 - 26,377,283
Net profit of the financial year 7,398,510,640 8,321,530,798
Previous year’s profit distribution (2,154,822,966) (979,464,985)
Employees’ profit share (832,962,180) (691,726,139)
Board of directors’ remuneration (16,000,000) (13,781,250)
Transferred to capital reserve (2,890,011) (6,434,554)
Transferred to general reserve (2,665,720,403) (4,886,735,548)
Transferred to legal reserve (415,932,039) (345,553,468)
Transferred from fair value reserve, net of tax - 9,368,086
Transferred from general banking risk reserve - 1,612,926
Balance at the end of the year 10,064,231,043 8,754,048,002
35 - Cash and cash equivalents For For the purpose of presenting the cash flow statement, cash and cash equivalents include the following balances maturing within less than 3 months from place- ment or acquisition date.
December 31, 2020 December 31, 2019
Cash and balances with central banks 3,841,120,383 3,956,390,015
Due from banks in less than 3 months 5,234,406,137 6,541,553,897
Treasury bills and other governmental notes (91 days) 109,334,969 726,823,580
Total 9,184,861,489 11,224,767,492
36 - Contingent liabilities and other commitments (a) Legal claims (litigation) Several Several lawsuits were brought against the Bank and are still outstanding as of December 31, 2020. No provision has been formed since it is not probable that the Bank will incur losses in regard of these lawsuits. (b) Capital commitments: The Bank is a party to contracts for capital commitments amounting to EGP 997,688,233 as of December 31, 2020 (EGP 956,533,263 on December 31, 2019). These rep- resent commitments by the Bank for the purchases of buildings and equipment. Management is sufficiently confident that net profit shall be realized and finance shall be made available to cover these commitments. (c) Commitments for guarantees The Bank’s commitments for loans, guarantees and facilities are set out below:
December 31, 2020 December 31, 2019
Financial guarantees 317,500 357,500
Accepted papers 1,797,703,754 3,300,687,075
L/Gs 40,570,756,871 42,590,274,614
Import L/Cs 1,999,824,168 3,474,261,881
Export L/Cs 226,134,764 205,713,506
Other contingent liabilities 19,632,824 367,558,187
Total 44,614,369,881 49,938,852,763
(d) Commitments for credit facilities December 31, 2020 December 31, 2019
Commitments for credit facilities 32,855,532,909 35,961,879,563
(e) Commitments under operating lease contracts Total minimum rental payments for the irrevocable operating lease contracts are as follows:
December 31, 2020 December 31, 2019
Not more than one year 127,355,381 95,093,222
More than one year and less than 5 years 393,504,249 275,023,904
More than 5 years 100,460,794 66,162,524
Total 621,320,424 436,279,650
110 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Separate Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
37 - Related-party transactions Qatar National Bank (Q.P.S.C.) is the ultimate parent and controlling party as at the end of the reporting year which owns 94.97% of the bank’s ordinary shares whereas the remaining 5.03% are held by other shareholders.
A number of transactions have been conducted during the reporting year with related parties within the Bank’s normal course of business. These include loans, depos- Report Strategic its, and foreign currency transactions. Related party transactions with the parent company other than the payment of dividends on ordinary shares:
QNB Group December 31, 2020 December 31, 2019
Due from banks 419,726 5,237,534
Due to banks 2,130,717,038 168,693,443
Export LC 2,513,234 6,483,525
LGs for banks 6,856,553,603 9,015,950,648
Foreign exchange derivative 1,329,333,503 989,007,803 Performance Operational Interest rate swap 4,548,543,413 5,055,077,688
A - Loans and credit facilities to related parties
Directors and other key management personnel Associates and Subsidiaries (and close family members)
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Outstanding loans at the beginning of the financial year 111 111 2,502,746,385 2,198,875,475 Social Corporate Responsibility Loans issued during the financial year - - 879,777,165 1,990,998,553
Loans repayment during the financial year - - (807,355,669) (1,687,127,643)
Loans outstanding at the end of the financial year 111 111 2,575,167,881 2,502,746,385
Interest income on loans 15 - 274,911,933 333,107,782
* No provisions have been recognized in respect of loan provided to related parties.
Directors and other key management personnel Associates and Subsidiaries
(and close family members) Management Risk Governance and and Governance Loans and credit facilities to related parties can be ana- December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Corporate lyzed below
Overdrafts 111 111 - 32,043
Revolving term loan - - 2,575,167,878 2,454,448,264
Visa card - - 3 -
Equipment loans - - - 48,266,078
Total 111 111 2,575,167,881 2,502,746,385 Separate Financial Separate B - Deposits from related parties Statements
Directors and other key management personnel Associates (and close family members)
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Deposits outstanding at the beginning of the financial year 62,923,605 64,394,311 949,461,066 2,071,730,814
Deposits placed during the year 11,381,135 5,389,712 231,207,968 14,793,914
Deposits repaid during the year (1,245,256) (6,860,418) (605,264,039) (1,137,063,662)
Deposits outstanding at the end of the financial year 73,059,484 62,923,605 575,404,995 949,461,066
Interest expense on deposits 2,174,975 2,474,684 27,499,712 56,973,250 Consolidated Statements Financial
Deposits from related parties can be analyzed below December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Demand deposits 10,310,095 1,593,925 23,635,648 31,650,741
Saving accounts 91,110 91,994 - -
Certificates of deposits 6,000,000 4,000,000 224,969,030 -
Time deposits 56,658,279 57,237,686 326,800,317 917,810,325
Total 73,059,484 62,923,605 575,404,995 949,461,066 Network Branches
QNB ALAHLI Annual Report 2020 — 111 QNB ALAHLI S.A.E Notes to the Separate Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
C - Other transactions with related parties
Directors and other key management personnel Associates and Subsidiaries (and close family members)
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Fee and commission income 566 14,036 11,588,424 8,474,427
Guarantees issued by the bank 42,352,262 1,195,753
The above guarantees comprise: - -
LGs - - 22,932 31,802
LCs 42,329,330 1,163,951
Total 42,352,262 1,195,753
The pricing for related parties’ transactions are the same for other parties. In accordance with the instructions of the Central Bank of Egypt (CBE) rules in 23 August 2011. The monthly average of net salaries and benefits for top 20 employees with the largest salaries and benefits reached ( EGP 8,650,786 ) during the current year.
38- Money Market and balanced Funds A - QNB ALAHLI First Fund with cumulative daily return (THEMAR Money Market Fund) The Bank has set up an investment fund under the name of “THEMAR” with daily accumulated interest as one of the banking activities authorized in accordance with the provisions of the Capital Market Law 95 of 1992. THEMAR initial offering was for one million certificates at nominal value of EGP 100 million, of which 50,000 certificates worth of EGP 5 million were subscribed by the bank at that time. EFG HERMES is managing this fund. Total number of the outstanding certificates at December 31, 2020 reached 11,377,254 at a total value of EGP 4,593,896,243 The Bank currently holds 227,545 certifi- cates worth of EGP 91,877,893 of which EGP 20,188,951 classified as fair value through other comprehensve income that represent 5% from the total number of certifi- cates that were initially issued, whereas the remaining value of EGP 71,688,942 which represents 2% of the increase in fund’s net asset value since initial subscription are classified as fair value through profit or loss. According to the management agreement and the fund’s prospectus, the Bank shall receive fees and commissions for supervising the fund and other administrative ser- vices. Total commissions for the current year amounting to EGP 22,252,412 have been reported in the “fees and commission income” line item in the income statement. B - QNB ALAHLI Second Fund with periodly / cumulative return (Tawazon Balanced Fund) The Bank has set up an investment fund under the name of Tawazon Fund with periodic income as one of the banking activities authorized in accordance with the provisions of the Capital Market Law 95 of 1992. Tawazon initial offering was for two hundred and fifty thousand certificates amounting to EGP 25 million, of which 50,000 certificates worth of EGP 5 million were subscribed by the bank at that time. Beltone Asset Management is managing this fund. Total number of the outstanding certificates at December 31, 2020 reached 56,046 at a total value of EGP 11,868,183. The Bank currently holds 50,000 certificates worth of EGP 10,587,895 that are classified as fair value through other comprehensve income and represent 20% of the total number of certificates that were initially issued. According to the management agreement and the fund’s prospectus, the Bank shall receive fees and commissions for supervising the fund and other administrative services. Total commissions for the current year amounting to EGP 57,731 have been reported in the “fees and commission income” line item in the Separate income statement. C - QNB ALAHLI Third Fund with periodly / cumulative return (Tadawol Equity Fund) The Bank has set up an investment fund under the name of Tadawol Fund with periodic accumulated income as one of the banking activities authorized in accordance with the provisions of the Capital Market Law 95 of 1992. Tadawol certificates were offered in a public offering amounting to EGP 25 million distributed over two hundred and fifty thousand certificates with a nominal value of EGP 100 each, subscriptions have only covered a number of one hundred and twenty five thousand certificates amounting to EGP 12.5 million, of which 50,000 certifi- cates worth of EGP 5 million were subscribed at by the bank at that time. HC Fund Manager Asset Management is managing this fund. Total number of the outstanding certificates at December 31, 2020 reached 76,895 at a total value of EGP 17,214,950 The Bank currently holds 50,000 certificates worth of EGP 11,193,804 that are classified as fair value through other comprehensve income and represent 40% from the total number of certificates that were initially issued. According to the management agreement and the fund’s prospectus, the Bank shall receive fees and commissions for supervising the fund and other administrative services. Total commissions for the current year amounting to EGP 189,866 have been reported in the “fees and commission income” line item in the income statement. 39- Important Events 1- The coronavirus (“COVID-19”) pandemic is continuing across the various geographies globally, causing disruption to business and economic activities. COVID-19 has brought about uncertainties in the global economic environment. QNBAA is closely monitoring the situation through the business continuity planning and other risk management practices to manage the business disruption caused by COVID-19 outbreak on its operations and financial performance. Based on the uncertainties caused by COVID-19 and following the actions taken by the state regarding the co-existence procedures, QNBAA is closely following up the loan portfolio considering the relevant impact of COVID-19 on the qualitative and quantitative factors where determining the significant increase in Credit Risk is specifically done for the whole portfolio with its different economic sectors. Accordingly, QNBAA is continuing its internal protective action started in Q1 2020 by enhancing the level of provisions as well as the portfolio coverage ratio as a miti- gation plan for the COVID-19 impact on the loan portfolio. Further precautionary actions might be taken progressively in the light of the pandemic is not over yet. 2- On September 15, 2020, the Central Bank of Egypt issued the Law No. 194 of 2020, which repealed Law No. 88 of 2003 of the “Central Bank, Banking Sector and Monetary System”. The law applies for the Central Bank of Egypt and the Egyptian banking system. The addressees are bound by the provisions of the law to adjust their positions in ac- cordance with its provisions, within a period not exceeding one year from the date of its implementation, and the Board of Directors of the Central Bank may extend this period for a period or for other periods not exceeding two years, The Central Bank have to issues a regulations and decisions implementing which related to it’s law.
112 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 113 Consolidated Financial Statements
114 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 115 KPMG Hazem Hassan Allied for Accounting and Auditing – EY Public Accountants & Consultants Public Accountants & Consultants
AUDITORS’ REPORT To the shareholders of QNB ALAHLI Bank (S.A.E)
Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of QNB Al Ahli Bank (S.A.E.) and its subsidiaries (the group) which comprise the consolidated financial position as at December 31, 2020 and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for Consolidated the Financial Statements These consolidated financial statements are the responsibility of Bank’s management. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the rules of preparation and presentation of the banks’ financial statements basis of recognition and measurement issued by Central Bank of Egypt on December 16, 2008 as amended by the regulations issued on February 26, 2019 and in light of the prevailing Egyptian laws and regulations, management responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; management responsibility also includes selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the Egyptian Standards on Auditing and in the light of the prevailing Egyptian laws. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessment, the auditor considers internal control relevant to the bank’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.
116 — QNB ALAHLI Annual Report 2020 Overview
Opinion Report Strategic In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the group as of December 31, 2020 and of its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with the rules of preparation and presentation of the banks’ financial statements basis of recognition and measurement issued by Central Bank of Egypt on December 16, 2008 as amended by the regulations issued on February 26, 2019 and in light of the prevailing Egyptian laws and regulations related to the preparation of these consolidated financial statements. Performance Operational
Auditors Corporate Social Social Corporate Responsibility
Aziz Maher Aziz Barsoum Mohanad T. Khaled FRA No.(228) Fellow of ACCA KPMG Hazem Hassan Fellow of ESAA Fellow of ETS Risk Management Risk R.A.A. 22444 and Governance Corporate Corporate FRA No. 375 BDO Khaled & Co.
Cairo, 12 January 2021 Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 117 QNB ALAHLI S.A.E Consolidated Statement of Financial Position As at 31 December 2020 (All amounts are shown in Egyptian Pounds)
Note December 31, 2020 December 31, 2019
Assets:
Cash and due from Central Bank of Egypt (CBE) (16) 17,166,858,582 12,012,836,152
Due from banks (17) 7,068,235,715 8,464,251,159
Treasury bills (18) 42,003,990,606 46,194,518,180
Trading investments (19) 61,102,261 84,301,673
Loans and credit facilities to customers (20) 163,635,801,748 153,527,192,019
Financial derivatives (21) 106,092,208 83,458,859
Financial Investments:
Fair value through other comprehensive income (22) 2,474,382,352 2,463,888,129
Amortized cost (22) 47,609,791,535 40,937,627,601
Fair value through profit or loss (22) 71,759,603 61,694,866
Investments in associates (23) 2,572,487 2,809,012
Intangible assets (24) 195,249,569 209,802,791
Other assets (25) 4,228,605,764 3,470,835,425
Deferred tax assets (33) 115,151,685 128,766,307
Finance lease 2,828,561,308 2,858,836,906
Property and equipment (26) 2,594,818,588 2,512,982,918
Total assets 290,162,974,011 273,013,801,997
Liabilities and equity:
Liabilities:
Due to banks (27) 4,138,835,958 16,030,665,382
Customer deposits (28) 233,321,758,983 208,126,587,681
Financial derivatives (21) 55,504,635 45,851,553
Other loans (29) 3,804,636,750 5,625,017,188
Other liabilities (30) 3,502,117,507 2,968,092,020
Other provisions (31) 599,639,123 743,849,118
Insurance policyholders' rights (32) 3,247,335,626 2,589,480,929
Current income tax payable 1,343,178,136 1,098,931,902
Defined benefits obligation (34) 513,228,220 482,288,384
Total liabilities 250,526,234,938 237,710,764,157
Equity:
Issued and paid-up capital (35) 10,774,114,830 9,794,649,850
Reserves (36) 17,645,616,759 15,660,147,528
Profit for the year and retained earnings (36) 11,216,966,389 9,848,191,979
Total equity attributable to equity holders of the bank 39,636,697,978 35,302,989,357
Non-controlling interests 41,095 48,483
Total equity 39,636,739,073 35,303,037,840
Total liabilities and equity 290,162,974,011 273,013,801,997
Mohamed Osman El-Dib Chairman and Managing Director
The accompanying notes from (1) to (41) are an integral part of these Consolidated Financial Statements. (Auditor’s report attached).
118 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Consolidated Income Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
From January 01, 2020 From January 01, 2019 Note To December 31, 2020 To December 31, 2019
Interest on loans and similar income (6) 30,738,143,195 32,372,534,448 Strategic Report Strategic Cost of deposits and similar expense (6) (16,100,796,190) (18,619,581,266)
Net interest income 14,637,347,005 13,752,953,182
Fee and commission income (7) 2,292,274,875 2,473,723,530
Fee and commission expense (7) (489,681,576) (501,949,911)
Net interest, fee and commission income 16,439,940,304 15,724,726,801
Dividend income (8) 35,191,190 49,611,913
Net trading income (9) 111,936,859 119,748,154
Gain on financial investments (22) 6,487,229 6,652,342 Performance Operational Impairment credit losses (12) (2,136,900,764) (697,159,681)
Administrative expenses (10) (3,707,305,018) (3,505,731,222)
Other operating revenues (expenses) (11) (181,369,781) (254,504,961)
Share of results of associates 156,535 375,949
Profit before income tax 10,568,136,554 11,443,719,295
Income tax expense (13) (3,076,626,112) (2,921,623,568)
Net profit for the year 7,491,510,442 8,522,095,727 Corporate Social Social Corporate Responsibility Attributable to:
Equity holders of the Bank 7,491,517,830 8,522,091,359
Non-controlling interests (7,388) 4,368
Net profit for the year 7,491,510,442 8,522,095,727
Earnings per share (14) 3.08 3.47 Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial
Mohamed Osman El-Dib Chairman and Managing Director Branches Network Branches
The accompanying notes from (1) to (41) are an integral part of these Consolidated Financial Statements.
QNB ALAHLI Annual Report 2020 — 119 QNB ALAHLI S.A.E Consolidated Statement other comprehensive income As at 31 December 2020 (All amounts are shown in Egyptian Pounds)
From January 01, 2020 From January 01, 2019 To December 31, 2020 To December 31, 2019
Net profit for the year 7,491,510,442 8,522,095,727
Other comprehensive income items that will not be reclassified to the Profit or Loss:
Net change in fair value of investments in equity instruments measured at fair value through other compre- (208,254,732) (29,707,974) hensive income
Tax impact related to other comprehensive income that will not be reclassified to the profit or loss 43,859,645 7,415,771
Amount transferred to retained earning, net of tax - (9,368,086)
Other comprehensive income items that is or may be reclassified to the profit or loss:
Net change in fair value of debt instruments measured at fair value through other comprehensive income 57,751,351 54,165,205
Tax impact related to other comprehensive income that will be reclassified to the profit or loss (12,994,054) (12,187,171)
Expected credit loss for fair value of debt instruments measured at fair value through other comprehensive 29,548 (29,494) income
Total other comprehensive income items for the year net of tax (119,608,242) 10,288,251
Total comprehensive income for the year, net of tax 7,371,902,200 8,532,383,978
Attributable to:
Equity holders of the Bank 7,371,909,588 8,532,379,610
Non-controlling interests (7,388) 4,368
Total comprehensive income for the year, net of tax 7,371,902,200 8,532,383,978
The accompanying notes from (1) to (41) are an integral part of these Consolidated Financial Statements
120 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 121 QNB ALAHLI S.A.E Consolidated Statement of Changes in Equity For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Reserve for Equity Attributable Issued and Paid General Special Capital Transactions Fair Value General Banking General Risk Net Profit for the Non-Controlling Legal Reserve IFRS 9 Reserve Retained Earnings to Equity Holders of Total Up Capital Reserve Reserve Reserve Under Common Reserve Risk Reserve Reserve Year Interests the Bank Control
December 31, 2019
Balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 173,681,968 12,054,965 4,000,483 (679,166,099) 2,781,992 1,282,925,633 - 1,043,126,551 7,200,541,436 28,653,432,754 44,115 28,653,476,869
Transfer to general risk reserve - - - (152,225,804) - - - - (1,282,925,633) 1,435,151,437 - - - - -
Impact of adopting IFRS 9 - - - 18,038,291 - - 1,193,292,938 - - (1,413,697,514) 26,389,444 - (175,976,841) - (175,976,841)
Restated balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 39,494,455 12,054,965 4,000,483 514,126,839 2,781,992 - 21,453,923 1,069,515,995 7,200,541,436 28,477,455,913 44,115 28,477,500,028
Transfer to reserves and retained earnings - 345,553,468 4,886,735,548 - 6,434,554 - - - - - 245,603,614 (5,484,327,184) - - -
Dividend distributions ------(1,716,214,252) (1,716,214,252) - (1,716,214,252)
Net Change in Other Comprehensive Income ------19,656,337 - - - - - 19,656,337 - 19,656,337
Reclassification of the net change in fair value of ------(9,368,086) - - - 9,368,086 - - - - equity instruments upon derecognition
Net profit for the year ------8,522,091,359 8,522,091,359 4,368 8,522,095,727
Transfer from general banking risk reserve ------(1,612,925) - - 1,612,925 - - - -
Balance at 31 December 2019 9,794,649,850 1,633,301,744 13,417,823,247 39,494,455 18,489,519 4,000,483 524,415,090 1,169,067 - 21,453,923 1,326,100,620 8,522,091,359 35,302,989,357 48,483 35,303,037,840
9,794,649,850 1,633,301,744 13,417,823,247 39,494,455 18,489,519 4,000,483 524,415,090 1,169,067 - 21,453,923 1,326,100,620 8,522,091,359 35,302,989,357 48,483 35,303,037,840 January 1, 2020
Transfer to reserves and retained earnings - 415,932,039 2,665,720,403 - 2,890,011 - - - - - 2,399,347,939 (5,483,890,392) - - -
Dividend distributions ------(3,038,200,967) (3,038,200,967) - (3,038,200,967)
Transfer from general reserve to capital increase 979,464,980 - (979,464,980) ------
Net Change in Other Comprehensive Income ------(119,608,242) - - - - - (119,608,242) - (119,608,242)
Net profit for the year ------7,491,517,830 7,491,517,830 (7,388) 7,491,510,442
Balance at 31 December 2020 10,774,114,830 2,049,233,783 15,104,078,670 39,494,455 21,379,530 4,000,483 404,806,848 1,169,067 - 21,453,923 3,725,448,559 7,491,517,830 39,636,697,978 41,095 39,636,739,073
The accompanying notes from (1) to (41) are an integral part of these Consolidated Financial Statements.
122 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Consolidated Statement of Changes in Equity Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Reserve for Equity Attributable Issued and Paid General Special Capital Transactions Fair Value General Banking General Risk Net Profit for the Non-Controlling Legal Reserve IFRS 9 Reserve Retained Earnings to Equity Holders of Total Up Capital Reserve Reserve Reserve Under Common Reserve Risk Reserve Reserve Year Interests the Bank
Control Report Strategic
December 31, 2019
Balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 173,681,968 12,054,965 4,000,483 (679,166,099) 2,781,992 1,282,925,633 - 1,043,126,551 7,200,541,436 28,653,432,754 44,115 28,653,476,869
Transfer to general risk reserve - - - (152,225,804) - - - - (1,282,925,633) 1,435,151,437 - - - - -
Impact of adopting IFRS 9 - - - 18,038,291 - - 1,193,292,938 - - (1,413,697,514) 26,389,444 - (175,976,841) - (175,976,841)
Restated balance at 1 January 2019 9,794,649,850 1,287,748,276 8,531,087,699 39,494,455 12,054,965 4,000,483 514,126,839 2,781,992 - 21,453,923 1,069,515,995 7,200,541,436 28,477,455,913 44,115 28,477,500,028
Transfer to reserves and retained earnings - 345,553,468 4,886,735,548 - 6,434,554 - - - - - 245,603,614 (5,484,327,184) - - -
Dividend distributions ------(1,716,214,252) (1,716,214,252) - (1,716,214,252)
Net Change in Other Comprehensive Income ------19,656,337 - - - - - 19,656,337 - 19,656,337 Performance Operational Reclassification of the net change in fair value of ------(9,368,086) - - - 9,368,086 - - - - equity instruments upon derecognition
Net profit for the year ------8,522,091,359 8,522,091,359 4,368 8,522,095,727
Transfer from general banking risk reserve ------(1,612,925) - - 1,612,925 - - - -
Balance at 31 December 2019 9,794,649,850 1,633,301,744 13,417,823,247 39,494,455 18,489,519 4,000,483 524,415,090 1,169,067 - 21,453,923 1,326,100,620 8,522,091,359 35,302,989,357 48,483 35,303,037,840
9,794,649,850 1,633,301,744 13,417,823,247 39,494,455 18,489,519 4,000,483 524,415,090 1,169,067 - 21,453,923 1,326,100,620 8,522,091,359 35,302,989,357 48,483 35,303,037,840 January 1, 2020 Corporate Social Social Corporate
Transfer to reserves and retained earnings - 415,932,039 2,665,720,403 - 2,890,011 - - - - - 2,399,347,939 (5,483,890,392) - - - Responsibility
Dividend distributions ------(3,038,200,967) (3,038,200,967) - (3,038,200,967)
Transfer from general reserve to capital increase 979,464,980 - (979,464,980) ------
Net Change in Other Comprehensive Income ------(119,608,242) - - - - - (119,608,242) - (119,608,242)
Net profit for the year ------7,491,517,830 7,491,517,830 (7,388) 7,491,510,442
Balance at 31 December 2020 10,774,114,830 2,049,233,783 15,104,078,670 39,494,455 21,379,530 4,000,483 404,806,848 1,169,067 - 21,453,923 3,725,448,559 7,491,517,830 39,636,697,978 41,095 39,636,739,073 Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 123 QNB ALAHLI S.A.E Consolidated Statement of Cash Flow For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds) Note December 31, 2020 December 31, 2019
Cash flows from operating activities
Profit before tax 10,568,136,554 11,443,719,295
Adjusted by:
Property and Equipment depreciation and Intangible assets amortization (10) 335,245,619 289,911,992
Impairment credit losses (12) 2,136,900,764 697,159,681
Loans written off during the year (295,240,203) (234,204,878)
Recovery from loans previously written off 18,569,861 25,455,529
Net formed / (reversed) other provisions (133,599,966) (77,414,349)
Utilized provisions other than loans provision (9,844,986) (11,253,410)
Translation differences of other provisions in foreign currencies (765,043) (6,569,817)
Translation differences resulting from monetary foreign currency investments 45,587,903 290,744,039
Amortization of premium / discount for bonds (83,804,926) (72,985,822)
Formed insurance policyholders' rights provisions during the year 657,854,697 528,488,434
(Gain) on sale of Property and Equipment (8,164,022) (2,895,344)
Dividend income (8) (35,191,190) (49,611,913)
Share of results of associates applying the equity method (156,535) (375,949)
Gain on financial investments (22) (6,487,229) (6,652,342)
Operating profits before changes in assets and liabilities resulting from operating activities 13,189,041,298 12,813,515,146
Net decrease / increase in assets and liabilities
Due from banks (5,243,272,627) (2,016,461,758)
Treasury bills 3,569,539,115 1,208,164,955
Trading investments 23,199,412 (7,493,482)
Loans and credit facilities to customers (11,974,787,356) (17,269,696,020)
Financial derivatives (12,980,267) (35,056,931)
Financial investement recognized at fair value through profit or loss (10,064,737) (16,245,691)
Other assets (757,524,077) (426,711,386)
Due to banks (11,891,829,424) 3,322,886,112
Customer deposits 25,195,171,302 2,841,067,898
Other liabilities 534,025,487 261,118,422
Defined benefits obligation 30,939,836 44,466,899
Net change Leased assets 30,275,598 (601,607,565)
Income tax paid (2,787,899,665) (2,523,866,221)
Net cash flows resulting from / used in operating activities (1) 9,893,833,895 (2,405,919,622)
Cash flows from investing activities
Acquisition of Property and Equipment and Intangible assets (402,859,180) (613,205,094)
Proceeds from sale of Property and Equipment 8,495,135 3,253,503
Proceeds from financial investments other than held for trading investments 7,009,034,245 4,535,102,791
Acquisition of financial investments other than held for trading investments (13,786,778,875) (6,997,299,939)
Dividends received 35,191,189 49,611,913
Cash dividends received from investments in associates 393,061 112,303
Net cash flows used in investing activities (2) (7,136,524,425) (3,022,424,523)
Cash flows from financing activities
Other loans (1,820,380,438) 386,472,160
Dividends paid (3,038,200,967) (1,716,214,252)
Net cash flows used in financing activities (3) (4,858,581,405) (1,329,742,092)
Net decrease in cash and cash equivalents during the year (1+2+3) (2,101,271,935) (6,758,086,237)
Cash and cash equivalents at the beginning of the year 11,286,384,895 18,044,471,132
Cash and cash equivalents at the end of the year (37) 9,185,112,960 11,286,384,895
Cash and cash equivalents at end of the year are represented in :
Cash and due from Central Bank of Egypt (16) 17,166,858,582 12,012,836,152
Due from banks (17) 7,078,843,393 8,473,376,520
Treasury bills 42,021,929,253 46,208,956,979
Balances with Central Bank of Egypt (mandatory reserve) (13,325,733,984) (8,056,431,357)
Balances Due from banks with maturities more than 3 months (1,844,190,000) (1,870,220,000)
Treasury bills with maturity more than 3 months (41,912,594,284) (45,482,133,399)
Cash and cash equivalents at end of the year 9,185,112,960 11,286,384,895 The accompanying notes from (1) to (41) are an integral part of these Consolidated Financial Statements.
124 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
1. Background QNB ALAHLI “S.A.E” (“The Bank”) was incorporated as an investment and commercial bank on April 13, 1978, in accordance with the provisions of the Investment Law no 43 of 1974 and its executive regulations and the amendments thereon. The Bank provides all banking services related to its activity, through its Head Office located in 5 Champlion Street - Downtown - Cairo and its 231 branches served by 6,686 staff at the date of the financial statements. The Bank is listed on the Egyptian Stock Exchange (EGX). Report Strategic These consolidated financial statements were approved by the Board of Directors on January 12, 2021. 2 Summary of significant accounting policies: 2.1 Basis of preparation of the consolidated financial statements These consolidated financial statements have been prepared in accordance with the instructions of the Central Bank of Egypt (CBE) rules approved by its Board of Directors on December 16, 2008; and as per IFRS 9 “Financial Instruments” in accordance with the instructions of the Central Bank of Egypt (CBE) dated February 26, 2019. These consolidated financial statements have been prepared in accordance with the applicable laws of Egypt. 2.2.1 Basis of Combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method unless the transaction does not constitute an acquisition in form or substance. Performance Application of the purchase method involves the following steps: Operational › Identifying an acquirer; › Measuring the cost of the business combination; › And allocating, at the acquisition date, the cost of the combination to the assets acquired, liabilities and contingent liabilities assumed. On acquisition date where control is obtained, the cost of the business combination is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer in exchange for control of the acquiree, in addition to any costs directly attributable to the business combination.
Thus, the acquirer recognizes the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the recognition criteria at their fair values at the acquisi- Social Corporate Responsibility tion date, except for non-current assets (or disposal groups) that are classified as held for sale, that are recognized and measured at the lower of their carrying amounts, or fair value less costs to sell. Goodwill arising on acquisition date is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognized immediately in profit or loss. The non-controlling interest in an acquiree is initially measured at the non-controlling interest proportionate share in the fair value of the assets, liabilities and contin- gent liabilities recognized at acquisition date. Risk Management Risk
When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the acquirer includes the amount of and Governance that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured reliably. Corporate Corporate A business combination agreement may allow for adjustments to the cost of the combination that are contingent on one or more future events. The acquirer usually estimates the amount of any such adjustment at the time of initially accounting for the combination, even though some uncertainty exists. If the future events do not occur or the estimate needs to be revised, the cost of the business combination is adjusted accordingly. However, when a business combination agreement provides for such an adjustment, that adjustment is not included in the cost of the combination at the time of ini- tially accounting for the combination if it either is not probable or cannot be measured reliably. If that adjustment subsequently becomes probable and can be measured reliably, the additional consideration shall be treated as an adjustment to the cost of the combination. In case of a business combination - made through step acquisitions for a Group reorganization purposes - involving entities or businesses under common control in
which all of the combining entities or businesses are ultimately controlled by the same party or parties, both before and after the business combination, the acquirer Financial Separate recognizes the identifiable assets, liabilities and contingent liabilities that meet the recognition criteria at their carrying amounts previously reported at the books of the Group with common control. Statements Any difference between the consideration paid or transferred and the carrying amounts of the acquiree’s net assets and contingent liabilities is reflected within equity as a reserve for transactions under common control. This policy is also applied in case of the groups’ full or partial acquisition of shares held by the non-controlling interests in a subsidiary or the partial disposition of the Group’s interest in a subsidiary while retaining control over that subsidiary. Therefore, no adjustments are made to reflect new fair value at the date of the combination; rather fair value for net assets, and contingent liabilities acquired in such cases shall be determined based on the fair value that was previously determined when control was initially obtained, as adjusted by any changes in equity components that have occurred during the period from the date when control was initially obtained up to the date when control has increased or decreased. Since combinations of entities or businesses under common control are scoped out of the CBE basis of preparation and presentation of the banks financial statements, EAS (29) and IFRS (3) Business Combinations, management applied the requirements of EAS (5) and IAS (8), which allows it, in the absence of a specific Standard or
Interpretation specifically addressing certain transaction, event or other circumstances, to set and develop an appropriate accounting policy that results in information Consolidated Statements that is more reliable and relevant to the economic decisions making needs of the financial statements users. Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 125 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.2.2 Transactions Eliminated on Consolidation Intra-group balances, and income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in pre- paring the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 2.2.3 Loss of Control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or in accordance with the Group’s accounting policy for financial instruments, depending on the level of influence retained. 2.2.4 Basis of presentation of consolidation The consolidated financial statements of the Group incorporate the financial statements of QNB ALAHLI (Parent) and entities controlled by the Bank (its Subsidiaries) at the end of each reporting date. A Subsidiary is an entity (including Special Purpose Entities) that is controlled, directly or indirectly, by the bank (Parent). Control exists when the Bank has the power, to govern the financial and operating policies of an entity to obtain benefits from its activities. This is usually achieved when the bank owns, directly or indirectly, through subsidiaries, more than half of the voting power of an entity, the existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has control. The Group fully consolidates its subsidiaries from the effective date in which control is obtained and deconsolidates them when such control ceases to exist. The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of a Group entity to bring its accounting policies into line with those used by other members of the Group. Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and their share of changes in equity since the date of the combination. Losses applicable to owners of the non-controlling interests in excess of their interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that owners of the non-controlling interests have a binding obligation and are able to make an additional investment to cover the losses. Since QNB ALAHLI incorporated QNB ALAHLI Factoring Company in which it owns 99.997% of its capital, increased its interest in QNB ALAHLI Leasing Company to 100%, and increased in QNB ALAHLI Life Insurance Company to 100% instead of 25%, and increased in QNB ALAHLI Asset Management Egypt Company to 100% instead of 4.875%,therefore, the full consolidation basis has been used for the preparation of the Group accompanying consolidated financial statements which com- prise the financial statements of QNB ALAHLI (the parent) and its subsidiaries, QNB ALAHLI Factoring, QNB ALAHLI Leasing Company, QNB ALAHLI Life Insurance Company and QNB ALAHLI Asset Management Egypt Company from the date in which control over each subsidiary was obtained. Non-controlling interest in these consolidated financial statements represents interests held by investors other than QNB ALAHLI in the subsidiaries. Information on subsidiaries is set out below.
Year of controlling Company name Origin Country Group Stake % (Acquisition or Incorporation)
QNB ALAHLI Factoring Company Egypt 2012 99.997
QNB ALAHLI Leasing Company Egypt 2012 100
QNB ALAHLI Life Insurance Company Egypt 2014 100
QNB ALAHLI Asset Management Egypt Company Egypt 2014 100
2.2.5 Investments in associates An associate is an entity over which the Group has significant influence that is not control or joint control. Significant influence exists where the bank holds voting rights of 20% to 50% in an entity. Acquisitions of Associates are accounted for using the purchase method; goodwill arising on acquisition of an associate, if any, is not presented separately, but is rather included within the carrying amount of the investment. Investments in associates are accounted for subsequently in the consolidated financial statements using the equity method. According to the equity method, an investment in an associate is initially recognized in the statement of financial position at cost and is subsequently adjusted to recog- nize the Group’s share in profit or loss, and other changes in the net assets, of the associate. 2.3 Segment reporting An operating segment is a group of assets and operations providing products or services whose risks and benefits are different from those associated with products or services provided by other operating segments. A geographical segment provides products or services within a specific economic environment characterized by risks and benefits different from those related to other geographical segments operating in a different economic environment. The Bank is divided into two main business lines, which are corporate banking and retail banking. In addition, a corporate center acts as a central funding department for the bank’s core businesses. The dealing room, proprietary activity and other non-core businesses are reported under the corporate banking business line. For the purpose of preparation of segment reporting by geographical region, segment profit or loss and assets and liabilities are presented based on the location of the branches. Given that the bank does not have any entity abroad, and unless otherwise stated in a specific disclosure, all equity and debt instruments of the bank issued by foreign institutions and credit facilities granted to foreign counterparties are reported based on the location of the domestic branch where such assets are recorded.
126 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.4 Foreign currency translation 2.4.1 Functional and presentation currency The consolidated financial statements of the Group are presented in the Egyptian Pound which is the Bank’s functional and presentation currency.
2.4.2 Transactions and balances in foreign currencies Report Strategic The Bank maintains its accounting records in Egyptian Pounds. Transactions in foreign currencies during the period are translated into the Egyptian Pounds using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated at end of reporting period at the exchange rates then prevailing. Foreign exchange gains and losses resulting from settlement and translation of such transactions and balances are recognized in the income statement and reported under the following line items: › Net trading income from held for trading assets and liabilities; › Other operating revenues (expenses) from the remaining assets and liabilities; › Investments in equity instrument recognized at fair value through other comprehensive income in equity. Changes in the fair value of investments in debt instruments; which represent monetary financial instruments, denominated in foreign currencies and classified as FVTOCI assets are analyzed into differences resulting from changes in the amortized cost of the instrument, differences resulting from changes in the applicable Performance exchange rates and differences resulting from changes in the fair value of the instrument. Differences resulting from changes in the amortized cost are recognized and Operational reported in the income statement in “Interest on loans and similar income” whereas differences resulting from changes in foreign exchange rates are recognized and reported in “Other operating revenues (expenses)”. The remaining differences resulting from changes in fair value are recognized in equity and accumulated in the “Fair value revaluation reserve” in Other comprehensive income. Valuation differences arising on the measurement of non-monetary items at fair value include gains or losses resulting from changes in foreign currency exchange rates used to translate those items. Total fair value changes arising on the measurement of equity instruments classified as at fair value through the profit or loss are recognized in the income statement, whereas total fair value changes arising on the measurement of equity instruments classified as FVTOCI are recognized directly in equity in the “Fair value reserve” in Other Comprehensive Income. Leased assets denominated in foreign currency which the group leases to others are measured at historical cost and translated to Egyptian Pounds using the exchange
rates prevailing at the dates of the initial recognition. Social Corporate Responsibility 2.5 Financial assets Financial assets are classified at amortized cost, fair value through other comprehensive income (FVTOCI) and fair value through profit or loss (FVTPL). The classifi- cation depends on the business model of the financial assets that are managed with its contractual cash flow and is determined by management at the time of initial recognition. 2.5.1 Financial assets classified as amortized cost The financial asset is retained in the business model of financial assets held to collect contractual cash flow. The objective from this business model is to collect contrac- tual cash flow which represented in principal and interest. The sale is an exceptional event for the purpose of this model and under the terms of the standard represent- ed in following: Significant deterioration for the issuer of financial instrument. › Management Risk Governance and and Governance Lowest sales in terms of rotation and value.
› Corporate › A clear and reliable documentation process for the justification of each sale and its conformity with the requirements of the standard. 2.5.2 Financial assets classified as fair value through other comprehensive income The financial asset is retained in the business model of financial assets held to collect contractual cash flows and sales. Held to collect contractual cash flows and sales are integrated to achieve the objective of the model. Sales are high in terms of turnover and value as compared to the business model retained for the collection of contractual cash flows. 2.5.3 Financial assets classified as fair value through profit or loss The financial asset is held in other business models including trading, management of financial assets at fair value, maximization of cash flows through sale. The objec- tive of the business model is not to retain the financial asset for the collection of contractual or retained cash flows for the collection of contractual cash flows and sales. Separate Financial Separate Collecting contractual cash flows is an incidental event for the objective of the model. Statements The characteristics of the business model are as follows: › Structuring a set of activities designed to extract specific outputs. › Represents a complete framework for a specific activity (inputs - activities - outputs). › One business model can include sub-business models. 2.6 Offsetting of financial assets and financial liabilities Financial assets and liabilities are offset when the group has a legally enforceable right to offset the recognized amounts and it intends to settle these amounts on a net basis, or realize the asset and settle the liability simultaneously. 2.7 Financial derivatives and hedge accounting Consolidated Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Fair values are Statements Financial determined based on quoted market prices in active markets, including recent market transactions, or valuation techniques, including discounted cash flow models and options pricing models, as appropriate. All derivatives are recognized as assets when their fair value is positive and as liabilities when their fair value is negative. Embedded derivatives, such as the conversion option in a convertible bond, are treated as separate derivatives if they meet the definition of a financial derivative, and when their economic characteristics and risks are not closely related to those of the host contract, provided that the host contract is not classified as at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in the income statement “Net trading income” ;unless the group chooses to designate the hybrid contract as a whole as at fair value through profit or loss. The timing of recognition in profit or loss, of any gains or losses arising from changes in the fair value of derivatives, depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. The parent bank designates certain derivatives as: Branches Network Branches › Hedging instruments of the risks associated with fair value changes of recognized assets or liabilities or firm commitments (fair value hedge); › Hedging of risks relating to future cash flows attributable to a recognized asset or liability or a highly probable forecast transaction (cash flow hedge). Hedge accounting is used for derivatives designated in a hedging relationship when the following criteria are met. At the inception of the hedging relationship, the bank documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the bank documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
QNB ALAHLI Annual Report 2020 — 127 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.7.1 Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized immediately in the profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The effective portion of changes in the fair value of the interest rate swaps and the changes in the fair value of the hedged item attributable to the hedged risk are recognized in profit or loss. Additionally, interest differential on interest rate swaps is recognized in profit or loss as part of ‘net interest income’ line item in the income statement. Any ineffectiveness is recognized in profit or loss in “Net trading income”. When the hedging instrument no longer qualifies for hedge accounting, the adjustment to the carrying amount of a hedged item, measured at amortized cost, arising from the hedged risk is amortized to profit or loss from that date to maturity of the asset using the effective interest method. Adjustment to the carrying amount of a hedged equity instrument that has been deferred in equity remains in equity until the asset is derecognized. 2.7.2 Cash flow hedge The effective portion of changes in the fair value of derivatives designated and effective for cash flow hedge is recognized in equity while changes in fair value relating to the ineffective portion is recognized immediately in the income statement in “Net trading income”. Amounts accumulated in equity are transferred to income statement in the relevant periods when the hedged item affects the income statement. The effective portion of changes in fair value of interest rate swaps and options are reported in “Net trading income”. When a hedging item expires or is sold or if hedging instrument no longer qualifies for hedge accounting requirements, gains or losses that have been previously accu- mulated in equity remain in equity and are only recognized in profit or loss when the forecast transaction ultimately occurs. If the forecast transaction is no longer ex- pected to occur any related cumulative gain or loss on the hedging instrument that has been recognized in equity shall be reclassified immediately to profit or loss. 2.7.3 Derivatives that do not qualify for hedge accounting Where a derivative instrument does not qualify for hedge accounting, changes in fair value of that derivative and related interest are recognized immediately in the income statement in “Net trading income” line item. However, gains or losses arising from changes in fair value of derivatives that are managed in conjunction with financial assets or financial liabilities, designated upon initial recognition at fair value through profit or loss, are included in “net income from financial instruments designated upon initial recognition as at fair value through profit or loss”. 2.8 Interest income and expense Interest income and expense on all interest-bearing financial instruments are recognized in “Interest income” and “Interest expense” line items in the income statement using the effective interest rate method. The effective interest rate is a method of calculating the amortized cost of a debt instrument whether a financial asset or a financial liability and of allocating its interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial debt instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability on initial recognition. When calculating the effective interest rate, the Group estimates the future cash flows, considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Interest income on loans is recognized on an accrual basis except for the interest income on non-performing loans, which ceases to be recognized as revenue when the recovery of interest or principal is in doubt. Interest income on non-performing or impaired (Stage 3) loans and receivables ceases to be recognized in profit or loss and is rather recorded off balance sheet in statis- tical records. Interest income on these loans is recognized as revenue on a cash basis as follows: 1- For retail loans, personal loans, small and medium business loans, real estate loans for personal housing and small loans for businesses, when interest income is collected and after recovery of all arrears. 2- For corporate loans, interest income is recognized on a cash-basis after the bank collects 25% of the rescheduled installments and provided these installments contin- ue to be paid for at least one year. If a loan continues to be performing thereafter, interest accrued on the principal then outstanding starts to be recognized as revenues. Interest that is marginalized prior to the date when the loan becomes performing is not recognized in the profit or loss except when the total balance of loan, prior to that date, is paid in full. 2.9 Fees and commission income Fees charged for servicing a loan or facility that is measured at amortized cost, are recognized as revenue as the service is provided. Fees and commissions on non-per- forming or impaired loans or receivables cease to be recognized as income and are rather recorded off balance sheet. These are recognized as revenue - on a cash basis - only when interest income on those loans is recognized in profit or loss, at which time, fees and commissions that are an integral part of the effective interest rate of a financial asset are treated as an adjustment to the effective interest rate of that financial asset. Commitment fees received by the bank to originate a loan are deferred if it is probable that the bank will enter into a specific lending arrangement and are regarded as a compensation for an ongoing involvement with the acquisition of the financial instrument and recognized as an adjustment to the effective interest rate. If the commit- ment expires without the bank making the loan, the fees are recognized as revenue on expiry. Loan syndication fees received by the bank are recognized as revenue when the syndication has been completed, only if the bank arranges the loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants). Fees and commissions that are earned on negotiating or participating in the negotiation of a transaction in favor of another entity, such as arrangements for the allot- ment of shares or another financial instrument or acquisition or sale of an enterprise on behalf of a client, are recognized as revenue when the transaction has been com- pleted. Administrative consultations and other service fees are usually recognized as revenue on a straight-line basis over the period in which the service is rendered. Fees from financial planning management and custodian services provided to clients over long periods are usually recognized as revenue on a straight-line basis over the period in which these services are rendered. Leasing revenues Revenues from lease contracts are recognized based on the interest rate implicit in each contract plus an amount equal to depreciation of the leased asset. Debit/credit differences between revenue recognized in profit or loss and rental value for each period are recorded in “leased assets – lease contracts settlement” account in the balance sheet whose balance is to be settled against the carrying amount of leased asset at the end of the contract period. Insurance revenues Premium income and Claim expense is recognized on accrual basis.
128 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.10 Dividends income Dividend income on investments in equity instruments and similar assets, other than investments in subsidiaries and associates, is recognized in the income statement when the bank’s right to receive payment is established.
2.11 Purchase and resale agreements and sale and repurchase agreements (repos and reverse repos) Report Strategic Financial instruments sold under repurchase agreements are not derecognized from the statement of financial position and cash receipts are shown in liability side in the statement of financial position. 2.12 Impairment of financial assets The Group reviews all its financial assets except for financial assets that are measured at fair value through profit or loss to assess the extent of impairment as described below. Financial assets are classified at three stages at each reporting date: – Stage 1 : Financial assets that have not experienced a significant increase in credit risk since the date of initial recognition, and the expected credit loss is calculated for 12 months. – Stage 2 : Financial assets that have experienced a significant increase in credit risk since the initial recognition or the date on which the investments are made, and Performance the expected credit loss is calculated over the life of the asset. Operational – Stage 3 :Impairment of financial assets whose expected credit loss is to be recognized over the life of the asset on the basis of the difference between the carrying amount of the instrument and the present value of expected future cash flows. Credit losses and impairment losses on the value of financial instruments are measured as follows: › The low risk financial instrument is classified at initial recognition in the first stage and credit risk is monitored continuously by the Bank’s credit risk management. › If it is determined that there has been a significant increase in credit risk since the initial recognition, the financial instrument is transferred to the second stage where it is not yet considered impaired at this stage. If there are indicators of impairment of the financial instrument, it is transferred to the third stage. › Social Corporate Responsibility › The financial assets created or acquired by the Group and include a high credit risk ratio for the Bank’s low risk financial assets are recognized on the initial recogni- tion of the second stage directly and therefore the expected credit losses are measured on the basis of expected credit losses over the life of the asset. 2.12.1 Significant increase in credit risk The Group considers that the financial instrument has experienced a significant increase in the credit risk when one or more of the following quantitative and qualita- tive criteria, as well as the factors relating to default, have been met. 2.12.2 Quantitative Factors When the probability of default over the remaining life of the instrument is increased from the date of the financial position compared to the probability of default over the remaining life expected at initial recognition in accordance with the Bank’s acceptable risk structure.
2.12.3 Qualitative Factors Management Risk Governance and and Governance Retail loans,micro and small businesses Corporate Corporate If the borrower encounters one or more of the following events: › The borrower submits a request to convert short-term to long-term payments due to negative effects on the borrower’s cash flows. › Extension of the deadline for repayment at the borrower’s request. › Frequent Past dues over the previous 12 months. › Future adverse economic changes affecting the borrower’s future cash flows. Corporate loans and Medium businesses Separate Financial Separate If the borrower has a follow-up list and / or financial instrument faced one or more of the following events: Statements › A significant increase in the rate of return on the financial asset as a result of increased credit risk. › Significant negative changes in the activity and physical or economic conditions in which the borrower operates. › Scheduling request as a result of difficulties facing the borrower. › Significant negative changes in actual or expected operating results or cash flows. › Future economic changes affecting the borrower’s future cash flows. › Early indicators of cash flow / liquidity problems such as delays in servicing creditors / business loans. Cancellation of a direct facility by the bank due to the high credit risk of the borrower.
› Consolidated Statements Nonpayments Financial The loans and facilities of institutions, medium, small, micro and retail banking are included in stage two if the period of non-payment is more than 60 days and less than 90 days. Note that this period (60 days) will be reduced by (10) days per year to become (30) days during (3) years from the date of application (Year 2019). Transfer between the Three stages: Transfer from second stage to first stage: The financial asset shall not be transferred from the second stage to the first stage unless all the quantitative and qualitative elements of the first stage are met and the full arrears of the financial asset and the proceeds are paid. Transfer from third stage to second stage:
The financial asset shall not be transferred from the third stage to the second stage until all the following conditions have been met: Network Branches › Completion of all quantitative and qualitative elements of the second stage; › Repayment of 25% of the balance of the outstanding financial assets, including accrued segregated / statistical interest; › Regularity of payment for at least 12 months.
QNB ALAHLI Annual Report 2020 — 129 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.13 Intangible assets 2.13.1 Goodwill Goodwill, arising from the acquisition or legal merger of subsidiaries, represents the difference between the cost of the combination and the acquiree interest in the fair value of the identifiable assets, liabilities and qualifying contingent liabilities of the acquire at the acquisition date. Goodwill is annually tested for impairment and is written-down to profit or loss at an annual amortization of 20% or impairment loss whichever is higher. 2.13.2 Software (computer programs) Expenditure on upgrade and maintenance of computer programs is recognized as an expense in the income statement in the period in which it is incurred. Expenditures directly incurred in connection with specific software are recognized as intangible assets if they are controlled by the group and when it is probable that they will gener- ate future economic benefits within more than one year that exceed its cost. Direct costs include the cost of the staff involved in upgrading the software in addition to a reasonable portion of relative overheads. Upgrade costs are recognized and added to the original cost of the software when it is likely that such costs will increase the efficiency or enhance the performance of the computers software beyond its original specification. Cost of computer software recognized as an asset shall be amortized over the year of expected benefits from three to five years except for the core IT system which is amortized over ten years. 2.14 Property and Equipment The Group’s property and equipment include lands and buildings of the bank which basically comprise the head office premises and branch buildings. All property and equipment are carried at historical cost net of accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the construction or acquisition of the items. Subsequent costs are included in the assets carrying amount or recognized separately, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. Repairs and maintenance expenses are recognized in profit or loss within “other operating costs” line item during the financial period in which they are incurred. The Group considers the residual value of its property and equipment as insignificant and immaterial in relation to the depreciable amount; therefore, the depreciable amount of the group’s property and equipment is determined without any deduction for residual values. Depreciation is charged so as to write off the cost of assets, other than land which is not depreciated, over their estimated useful lives, using the straight-line method based on the following annual rates:
Buildings 50 years
Decoration & installations 10 years
Lifts 15 years
Electricity & Air conditioning 10 years
Fixtures Generators 30 years
Telephone network & CCTV 10 years
Firefighting system & Plumbing system 10 years
Other installations 10 years
Leasehold improvements The shortest of 10 years or contract period
Depreciation years for property and equipment, other than buildings, depend on their useful lives which are usually estimated as specified below:
Furniture 10 years
Armored vaults 20-30 years
IT equipment 5 years
Electric appliances 5 years
Vehicles 5 years
The carrying amounts of its depreciable property and equipment are reviewed whenever changes in circumstances or events indicate that the carrying amounts of those assets may not be recovered. Where the carrying amount of an asset exceeds its recoverable amount, the carrying amount is reduced to its recoverable amount. The recoverable amount of an asset is the higher of the asset’s net realizable value or value in use. Gains or losses on disposals are determined by comparing proceeds with relevant carrying amount. These are included in the profit or loss in other operating income (expenses) in the income statement.
130 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.15 Impairment of non-financial assets Non-financial assets that do not have definite useful lives, except for goodwill are not amortized. These are annually tested for impairment. Depreciable property and equipment are tested for impairment whenever changes in circumstances or events indicate that the carrying amounts of those assets may not be recovered. Impair- ment loss is recognized and the carrying amount of an asset is reduced to the extent that such carrying amount exceeds the asset’s recoverable amount. Strategic Report Strategic The recoverable amount of an asset is the higher of the asset’s net realizable value or value in use. For the purpose of estimating the impairment loss, where it is not possible to estimate the recoverable amount of an individual asset,The Group estimates the recoverable amount of the cash-generating unit to which the asset belongs is estimated. At the end of each period, the group reviews non-financial assets for which an impairment loss is recognized to assess whether or not all or part of such impairment losses should be reversed through profit or loss. 2.16 Leasing Lease contracts are accounted according to Law 95 of 1995 for financial lease. All other lease contracts are recognized as operating leases. 2.16.1 As a lessee Lease payments made under operating leases, net of any discounts received from the lessor, are recognized as an expense in the profit or loss on a straight-line basis over the lease term. Performance Operational 2.16.2 As a lessor Assets leased out under operating lease contracts are reported as part of the fixed assets in the statement of financial position and are depreciated over the expected useful lives of the assets, on the same basis as other property assets. Lease rental income is recognized in profit or loss, net of any discounts granted to the lessee, using the straight line method over the contract term. Assets leased out under finance lease contracts, are reported in the statement of financial position within fixed assets and are depreciated over the expected useful life of the assets using the same method followed in depreciating similar assets. Lease income is recognized using the rate of return implicit is each lease contract in addi- tion to an amount equal to depreciation charge for the period. Differences between lease income recognized in the income statement and rental receivable from lease customers are accumulated and reported in the statement of financial position in a separate account until duration of the lease contract expires, at which time offset occurs between the account balance and net book value of leased assets. Corporate Social Social Corporate Maintenance and insurance expenses shall be charged to the income statement when incurred to the extent that they are chargeable to the lessee. If substantive evi- Responsibility dence indicates that the group could not be able to collect all balances due from finance lease debtors, these balance are reduced to their expected realizable value. Assets leased under finance lease arrangements, rentals In arrear and the related impairment loss allowance has been presented in financial position under the finance lease item. Depreciation is charged so as to write off the cost of leased assets, other than land which is not depreciated, over their estimated useful lives, using the straight-line method based on the following annual rates:
Computers 2-8 years
Equipment 4-10 years Risk Management Risk Governance and and Governance Vehicles 4-5 years Corporate Corporate Building 17-50 years
2.17 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise balances due within three months from date of placement or acquisition. They include cash and balances placed with the Central Bank of Egypt (other than those required under the mandatory reserve), current accounts with Banks and treasury bills, certificates of deposits and other governmental notes. 2.18 Other provisions Provisions for obligations, other than those for credit risk or employee benefits, due within more than 12 months from the date of consolidated financial statements are recognized based on the present value of the best estimate of the consideration required to settle the present obligation at the reporting date. An appropriate pretax Financial Separate
discount rate that reflects the time value of money is used to calculate the present value of such provisions. Statements For obligations due within less than twelve months from the date of consolidated financial statements, provisions are calculated based on undiscounted expected cash outflows unless the time value of money is material, in which case provisions are measured at present value. When a provision is wholly or partially no longer required, it is reversed through the profit or loss under “Other Operating Income (expenses)” line item. Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 131 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.19 Insurance activity 2.19.1 Technical reserves 2.19.1.1 Mathematical reserve The mathematical reserve is calculated by the actuarial expert according to the technical basis approved by the board of the Egyptian Financial Supervisory Authority (Formerly Egyptian Insurance Supervisory Authority), in addition to the portion of each certificate from the increase (decrease) in the capital value resulting from insurance premiums invested in investment portfolio for the account of policyholders. 2.19.1.2 Provision for outstanding claims A provision for outstanding claims is established for life and personal accident insurance policies. Which were reported before the period-end but not settled at the balance sheet date. 2.19.2 Receivables arising from insurance contracts Receivables arising from insurance contract either as installments under collection or current accounts of insured parties are carried at amortized cost which represent nominal balances, net of impairment loss. 2.19.3 Due from insurance and reinsurance companies Insurance and reinsurance companies stated at amortized cost, which represent its book value, net of allowance for impairment loss. 2.20 Financial guarantees A financial guarantee contract is a contract issued by the group as security for loans or overdrafts due from its clients to other entities that requires the group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees are generally issued by the Bank to beneficiary banks, corporations and other entities on behalf of the bank’s clients. When a financial guarantee is recognized initially, it is measured at its fair value plus, transaction costs that is directly attributable to the issue of such financial guaran- tee. After initial recognition, a financial guarantee contract issued by the bank is measured at the higher of: (I) The amount initially recognized less, when appropriate, cumulative amortization of security fees recognized as income in profit or loss using the straight-line method over the term of the guarantee; and (II) The best estimate for the payments required to settle any financial obligation resulting from the financial guarantee at the reporting date. Such estimates are made based on experience in similar transactions and historical losses as supported by management judgment. Any increase in the obligations resulting from the financial guarantee, is recognized within other operating income (expenses) in the income statement. 2.21 Employee benefits 2.21.1 Post-employment benefits (defined benefit plans) and defined contribution plans: The Bank is liable for all obligations arising from its plans for employee benefits which comply, in all material respects, with the principles set out below. Starting 1 Jan- uary 2009, the Bank has fully complied with the policy referred to below, and recognized any adjustments, resulting from the first full implementation of amendments to the CBE rules, directly on retained earnings. The Bank provides several post-employment benefits to its employees, such as the medical care scheme which qualifies as a defined-benefit plan. A defined benefit plan commits the Bank, either formally or constructively, to pay a certain amount or level of future benefits and therefore bears the medium- or long-term risk. The Bank recognizes the defined benefit obligation as a liability in the statement of financial position under “obligations for post-retirement schemes” to cover the total value of such obligations. This is assessed regularly by independent actuary using the projected unit credit method. This valuation technique incorporates assumptions about demographics variables, staff turnover, salary growth rate and discount and inflation rates. When these plans are financed from external funds classified as plan assets, the fair value of these funds is subtracted from the defined benefit obligation. Differences arising from changes in the actuarial assumptions and estimates are recognized in the income statement as actuarial gains or losses to the extent of the higher of the following two amounts as of the end of the previous financial period: › 10% of the present value of the defined benefit obligation (before deducting plan assets); and › 10% of the fair value of the plan assets. Actuarial gains and losses that exceed the 10 percent criteria above are amortized to profit or loss over the expected average remaining working lives of the participat- ing employees. Past service cost is recognized immediately to the extent that the benefits have already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. Annual cost of employee benefits plans is reported as part of general and administrative expenses (employee costs). Defined contribution plans are pension schemes whereby the group pays defined contributions to an independent entity. The group shall not be under legal or construc- tive obligation to pay more contributions if this entity doesn’t maintain adequate assets to pay-off the employees’ benefits in return for their service in the current and previous periods. According to the defined contribution plans, contributions are paid to private sector pension scheme under mandatory or voluntary contractual arrangement. The group shall be under no additional obligation other than the contribution payments. Contributions to defined contribution retirement benefit plans are recognized as employee benefits cost when employees have rendered service entitling them to the contributions. Prepaid contributions shall be recognized as assets to the extent that these contribution payments will reduce future payments or result in cash refunds. 2.22 Income taxes Income tax expense on the period’s profit or loss represents the sum of the tax currently payable and deferred tax and is recognized in the income statement, except when they relate to items that are recognized directly in equity, in which case the tax is also recognized in equity. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period, in addition to income tax differences related to prior years. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the correspond- ing tax bases used in the computation of taxable profit. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. However, when it is expected that the tax benefit will increase, the carrying amount of deferred tax assets shall increase to the extent of previous reduction.
132 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
2.23 Borrowings Loans obtained by the bank are initially recognized at fair value net of transaction costs incurred in connection with obtaining the loan. Borrowings are subsequently measured at amortized cost, with the difference between net proceeds and the value to be paid over the borrowing period, recognized in the profit or loss using the effective interest rate method. Strategic Report Strategic 2.24 Capital 2.24.1 Capital issuance cost Issued and paid up-capital (i.e. bank’s own equity instruments) is initially measured at the cash proceeds received, less transaction costs directly attributable to the issuance of new shares, issuance of shares to effect business combination, or issue of share options. Transaction costs, net of tax benefits, are reported as a deduction from equity. 2.24.2 Dividends Dividends on equity instruments issued by the group entities are recognized when the general assembly of the group’s shareholders approves them. Dividends include the non-controlling interests’ share in the subsidiaries’ dividends, and employees’ profit share and board of directors’ remuneration as prescribed by the articles of incor- poration of the bank and Group entities as well as the corporate law. 2.25 Fiduciary activities Performance
The Bank carries out fiduciary activities that result in ownerships or management of assets on behalf of individuals, trusts, and retirement benefit plans and other Operational institutions. These assets and income arising thereon are not recognized in the group’s consolidated financial statements, as they are not assets or income of the Bank or the Group. 2.26 Comparative figures Comparative figures are reclassified, where necessary, to conform to changes in the current period’s financial statements presentation. 3. Management of financial risks The Group is exposed to various financial risks, mainly as a result of activities conducted by the Bank and some subsidiaries. Since financial activities are based on the concept of accepting risks and analyzing and managing individual risks or group of risks altogether, the group aims at achieving a well-balanced risks and relevant rewards, as appropriate and to reduce the probable adverse effects on the group’s financial performance. The most important types of risks are credit risk, market risk, liquidity risk and other operating risks. The market risk comprises foreign currency risk, interest rate risk and other pricing risks. Corporate Social Social Corporate Responsibility For example, the Bank has laid down risk management policies to determine and analyze the risks, set limits to the risks and control them through reliable methods and up–to–date systems. The Bank regularly reviews the risk management policies and systems and amendments thereto, so that they reflect the changes in markets, products and services and the best up-to–date applications. Risks are managed in accordance with pre-approved policies by the board of directors. The risk management department identifies, evaluates and covers financial risks, in close collaboration with the Bank’s various operating units. The board of directors provides written rules which cover certain risk areas, such as credit risk, foreign exchange risk, interest rate risk and the use of derivative and non-derivative financial instruments. Moreover, the risk department is responsible for the periodic review of risk management and the control environment independently. Risk management strategy The bank operates in business lines, which generate a range of risks whose frequency, severity and volatility can be of different and significant magnitudes. A greater Risk Management Risk
ability to calibrate its risk appetite and risk parameters, the development of risk management core competencies, as well as the implementation of a high-performance and Governance and efficient risk management structure are therefore critical undertakings for the bank. Corporate Corporate Thus, the primary objectives of the bank’s risk management framework are: › To contribute to the development of the Bank in various business lines to reach an ideal level of general risk. › To guarantee the Bank’s sustainability as a going concern, through the implementation of a high-quality risk management infrastructure. In defining the Bank’s overall risk appetite, the bank management takes various considerations and variables into account, including: › The relative balance between risk and reward of the bank’s various activities. Earnings sensitivity to business, credit and economic cycles. › Financial Separate The aim of achieving a well-balanced portfolio of earnings streams. › Statements Risk management governance and risk principles Bank’s risk management governance is based on: i) Strong managerial involvement, throughout the entire organization, starting from the Board of Directors down to operational field management teams; ii) A tight framework of internal procedures and guidelines; and iii) Continuous supervision by business lines and support functions as well as by an independent body to monitor risks and to enforce rules and procedures. Within the Board, the Risk and Audit Committees are more specifically responsible for examining the consistency of the internal framework for monitoring risks and compliance. Consolidated Statements Financial Branches Network Branches
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Risk categories The following are part of the risks associated with the bank’s Banking activities: a- Credit risk: (Including country risk): represents risk of losses arising from the inability of the Bank’s customers, sovereign issuers or other counterparties to meet their financial commitments. Credit risk also includes the replacement risk linked to market transactions. In addition, credit risk may be further increased by a concentration risk, which arises either from large individual exposures or from groups of counterparties with a high default probability. b- Market risk: Represents risk of loss resulting from changes in market prices and interest rates. c- Operational risk: (Including legal, compliance, accounting, environmental, reputational risks, etc.): represents risk of loss or fraud or of producing inaccurate financial and accounting data due to inadequacies or failures in procedures and internal systems, human error or external events. Additionally, operational risks may also take the form of com- pliance risk, which is the risk of the bank incurring either legal, administrative or disciplinary sanctions or financial losses due to failure to comply with relevant rules and regulations. d- Structural interest and exchange rate risk: Represents risk of loss or of residual depreciation in the bank’s balance sheet and off-balance sheet assets arising from changes in interest or exchange rates. Structural interest and exchange rate risk arises from banking commercial activities and on Corporate Center transactions (operations on equities, investments and bond issues). e- Liquidity risk: Represents the risk that the bank might not be able to meet its obligations as they become due. The Bank dedicates significant resources to constantly adapting its risk management to its activities and ensures that its risk management framework operates in full compliance with the following fundamental principles of: – Full independence of risk assessment departments from the operating divisions; and – Consistent approach to risk assessment and monitoring applied throughout the Bank. The Risk Division is independent from the bank’s operating entities and reports directly to general management. Its role is to contribute to the development and profitability of the bank by ensuring that the risk management framework in place is both robust and effective. It employs various teams specializing in the operational management of credit and market risk. More specifically, the Risk Division: › Defines and approves the methods used to analyze, assess, approve and monitor credit risks, countries risks, market risks and operational risks; conducts a critical review of commercial strategies in high risk areas and continually seeks to improve such risk forecasting and management; › Contributes to independent assessment by analyzing transactions implying a credit risk and by providing guidance on transactions proposed by sales managers. Identifying a frame for all Banks’ operational risks. The Assets and Liabilities Unit under the Finance Division, for its part, is entrusted with assessing and managing other major types of risks, namely liquidity and struc- tural risks (resulting from interest rate, exchange rate and liquidity) as well as the bank’s long term financing, management of capital requirements and equity structure. The Internal Legal Counsel deals with compliance and legal risks. Responsibility for devising the relevant risk management structure and defining risk management operating principles lies mainly with both the Risk Division and, in particular fields, the assets and liabilities management under Finance Division. The Bank’s Risk Committee is in charge of reviewing all the bank’s key risk management issues and meets at least on quarterly basis. Risk Committee’s monthly meet- ings involve members of the Executive Committee, the heads of the business lines and the Risk Division managers and are used to review all the core strategic issues: risk-taking policies, assessment methods, material and human resources, analysis of credit portfolios and of the cost of risk, market and credit concentration limits (by product, country, sector, region, etc.) On the other hand, the Assets and Liabilities management committee (ALCO) is competent for matters relating to funding and liquidity policymaking and planning. All new products and activities or products under development must be submitted to the New Product Committee. This New Product Committee aims at ensuring that, prior to the launch of a new activity or product, all associated risks are fully understood, measured, approved and subject to adequate procedures and controls, using the available information and processing systems. Operational risks, permanent control and audit (periodic) control process are supervised by the Audit and Accounts Committee that meets on a quarterly basis. Finally, the Bank’s risk management principles, procedures and infrastructures and their implementation are monitored by the Internal Audit team and the External Auditors.
134 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A) CREDIT RISKS The Bank is exposed to the credit risk which is the risk resulting from failure of the client to meet its contractual obligations towards the bank. The credit risk is consid- ered to be the most significant risk for the bank, therefore requiring careful management. The credit risk manifests itself in the lending activities and debt instruments in bank’s assets as well as off balance sheet financial instruments, such as letters of credit and letters of guarantee. Strategic Report Strategic (A/1) Credit risk management: organization and structure Maintaining comprehensive and efficient management and monitoring of credit risk – which constitutes the bank’s primary source of risk – is vital to preserving bank financial strength and profitability. As a result, the bank implements a tight credit risk control framework, whose cornerstone is the Credit Risk Policy and Authorities defined jointly by the Risk Division and the Business Lines, and is subject ot periodic review and approval by the Board of Directors. Within the Risk Division, persons are responsible for: › Setting credit limits by customer, customer group or transaction type; › Approving credit score or internal customer rating criteria; › Monitoring and surveillance of large exposures and various credit portfolios;
Reviewing specific and general provisioning policies. Performance › Operational In addition, comprehensive portfolio analysis is performed in order to provide guidance to the General Management on the bank’s overall credit risk exposure as well as reporting to Risk Committee. The Risk Division also helps define criteria for measuring risk and defining appropriate provisioning practices. Risk approval Embedded in bank’s credit policy is the concept that approval of any credit risk undertaking must be based on sound knowledge of the client and a thorough understand- ing of the client’s business, the purpose, nature and structure of the transaction and the sources of repayment, while bearing in mind the bank’s risk strategy and risk appetite. The risk approval process is based on four core principles: Corporate Social Social Corporate Responsibility › All transactions involving replacement risk must be pre-authorized ,replacement risk is bearing a loss when a bank is forced to replace a contract in case of breaching the original party’s contract (debtor risk, non-settlement or non-delivery risk and issuer risk). › Staff assessing credit risk is fully independent from the decision-making process. › Subject to relevant credit delegations, responsibility for analyzing and approving risk lies with the most appropriate business line or credit risk unit, which reviews all authorization requests relating to a specific client or client group, to ensure a consistent approach to risk management. › All credit decisions systematically include internal obligor risk ratings, as proposed by business lines and vetted by the Risk Division and approved by concerned Credit Committee. Risk management and audit Risk Management Risk Changes in the quality of outstanding commitments are reviewed on a periodic basis and at least once a quarter, as part of the “sensitive names” and provisioning pro- and Governance
cedures. This review is based on analyses performed by the business divisions and the risk function. Furthermore, the Internal Audit also carries out file reviews or risk Corporate audits in the bank’s branch groups and reports its findings to the General Management. Replacement risk Replacement risk provides the measurement of the replacement cost of a transaction in the event of default by the original counterparty and the necessity to close the ensuing position with counterparty; hence, the replacement cost is the result of the market price between the date on which the original transaction is entered into and the default date. Transactions giving rise to replacement risk include interest rate swaps and forward FX deals. Replacement risk management The Bank places great emphasis on carefully monitoring its replacement risk exposure in order to minimize its losses in case of default of its counterparties and counter- party limits are, therefore, assigned to all trading counterparties, irrespective of their status (bank, other financial institution, corporate and public institutions). Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 135 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/2) Risk measurement and internal ratings Bank rating system is based on three key pillars: – The internal ratings models used to measure and quantify counterparty risk. – A set of procedures defining guidelines for devising and using ratings (scope, frequency of rating revision, procedure for approving ratings, etc.) – Reliance on human judgment to improve modeling results to include elements outside the scope of rating model. Credit risk rating is supported by a set of procedures ensuring reliable, consistent and timely default and loss data detection. Rating models are reviewed and developed when necessary. The Bank regularly evaluates performance of credit rating models and their capacity to predict default cases. The calculations used to measure and monitor replacement risk include: › Current Average Risk (CAR) is a calculation of the Average risk of all the future scenarios, excluding the negative scenarios, i.e., when the replacement makes a gain. › Credit value at risk (VAR) is a calculation of the largest loss that would be incurred in 99% of cases. Following are some risk mitigations methods: Collaterals The Bank designs several policies and controls for credit risk mitigation such as collaterals for funds provided. The bank lays down guidelines for specific categories of the accepted collaterals. The main types of collaterals for Loans and credit facilities are: › Real estate mortgage; › Pledge on business assets like machinery and merchandise; › Pledge in financial instruments like debt instruments and equity. The long term financing and lending for companies are often collaterized while credit facilities for persons are not collaterized. The bank attempts to mitigate the credit risk through additional collaterals from the concerned parties immediately on arising of impairment indicators for any of the loans or facilities. Collaterals taken to secure assets other than Loans and credit facilities are identified according to the nature of the instrument. Debit instruments and treasury bills are often not collaterized. Derivatives The Bank exercise prudential strict control procedures on net open positions of derivatives. i.e. The difference between sale and purchase agreements at the level of value and duration. The amount exposed to credit risk at any time is determined at fair value of the instrument that may achieve benefit to the bank. i.e. any assets with high positive fair value which represents insignificant part of contractual imputed value used to reflect the volume of existing instruments. This credit risk is managed as part of overall lending limit granted to the customer together with the potential risk as a result of market changes. The Bank doesn’t obtain collaterals for credit risk related to such instruments except for the amounts requested by the bank as marginal deposits from other parties.
136 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/3) Provisioning policy (Measurement of expected credit losses) The Group’s policies require the identification of three stages of classifying financial assets measured at amortized cost, loan commitments and financial guarantees as well as debt instruments at fair value through other comprehensive income in accordance with changes in credit quality since initial recognition and thereafter measur- ing the impairment losses (expected credit losses) as follows: Strategic Report Strategic The un-impaired financial asset is classified at initial recognition in the first stage and credit risk is monitored continuously by the Bank’s credit risk management. In the case of a significant increase in credit risk since the initial recognition, the financial asset is transferred to the second stage and the financial asset is not consid- ered at this stage (the expected credit loss over the life of the asset without impairment). In case of indications of impairment of the financial asset, it is transferred to the third stage. The Group relies on the following indicators to determine whether there is objective evidence of impairment: – A significant increase in the rate of return on the financial asset as a result of increased credit risk. – Significant negative changes in the activity and financial or economic conditions in which the borrower operates. – Scheduling request as a result of difficulties facing the borrower. Performance – Significant negative changes in actual or expected operating results or cash flows. Operational – Future economic changes affecting the borrower’s future cash flows. – Early indicators of cash flow / liquidity problems such as delays in servicing creditors / business loans. – Cancellation of a direct facility by the bank due to the high credit risk of the borrower. The following table illustrates the proportional distribution of loans and credit facilities reported in the financial position for each of the four internal ratings of the Bank and their relevant impairment losses:
December 31, 2020 December 31, 2019 Corporate Social Social Corporate Loans and credit facilities Allowance for impairment loss Loans and credit facilities Allowance for impairment loss Responsibility
Good debts 87.20% 11.18% 90.12% 15.79%
Normal watch-list 6.78% 15.65% 5.35% 11.47%
Special watch-list 3.02% 27.47% 1.74% 25.58%
Non performing loans 3.00% 45.70% 2.79% 47.16%
100% 100% 100% 100%
(A/4) General Model for Measurements of Banking Risks: Management Risk Governance and and Governance In addition to the four categories of the bank’s internal credit ratings indicated above, management classifies Loans and credit facilities based on more detailed sub- Corporate Corporate groups in accordance with the CBE requirements. Assets exposed to credit risk in these categories are classified according to detailed rules and terms depending heavily on information relevant to the customer, his activity, financial position and his repayment track record. The Group calculates the allowances required for impairment of assets exposed to credit risk, including commitments relating to credit on the basis of rates determined by CBE. In case, the allowance required for impairment losses as per CBE credit worthiness rules exceeds the provisions as required by the expected credit loss, that ex- cess shall be debited to retained earnings and carried to the general banking risk reserve in the equity section. Such reserve is always adjusted, on a regular basis, by any increase or decrease so that the reserve shall always be equivalent to the amount of increase between the two provisions. Such reserve is not available for distribution; note (37) shows the movement (if any) on the general banking risk reserve during the financial year. Below is a statement of credit rating for corporations as per the Bank’s internal ratings compared with those of CBE’s; it also includes the percentages of provisions required for impairment of assets exposed to credit risk. Financial Separate Statements Required Provision CBE rating Description Internal Rating Internal Description According to % ORR
1 Low risk 0% 1 Good debts
2 Moderate risks 1% 1 Good debts
3 Satisfactory risks 1% 1 Good debts
4 Appropriate risks 2% 1 Good debts
5 Acceptable risks 2% 1 Good debts
6 Marginally acceptable risks 3% 2 Normal watch-list Consolidated Statements Financial 7 Watch-list 5% 3 Special watch-list
8 Substandard debts 20% 4 Non-performing loans
9 Doubtful debts 50% 4 Non-performing loans
10 Bad debts 100% 4 Non-performing loans Branches Network Branches
QNB ALAHLI Annual Report 2020 — 137 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/5) Maximum limit for credit risk before collaterals
Financial position items exposed to credit risks December 31, 2020 December 31, 2019
Treasury bills 42,003,990,606 46,194,518,180
Loans and credit facilities to customers
Retail loans
Overdrafts 3,444,193,377 3,433,826,947
Credit cards 1,056,199,108 975,503,290
Personal loans 25,174,858,319 19,979,405,278
Real estate loans 2,114,526,363 1,743,041,205
Corporate loans
Overdrafts 63,420,178,536 62,308,459,497
Direct loans 45,557,308,731 41,200,398,353
Syndicated loans and facilities 19,064,953,752 19,111,959,605
Other loans 3,901,049,525 4,912,058,973
Segregated interest , unearned discount and deferred income (97,465,963) (137,461,129)
Financial derivatives 106,092,208 83,458,859
Financial investments
Debt instrument 49,464,378,060 42,573,465,078
Other Financial assets 2,971,309,301 2,519,168,442
Total 258,181,571,923 244,897,802,578
The following table provides information on the quality of financial assets during the year:
December 31, 2020
Due from banks Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 845,339,887 117,484,768 - 962,824,655
Normal watch-list 3,737,172,764 2,378,845,974 - 6,116,018,738
Special watch-list - - - -
Non performing loan - - - -
4,582,512,651 2,496,330,742 - 7,078,843,393
Allowance for impairment losses (10,607,678) - - (10,607,678)
Carrying amount 4,571,904,973 2,496,330,742 - 7,068,235,715
December 31, 2019
Due from banks Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 978,370,746 146,348,168 - 1,124,718,914
Normal watch-list 5,078,070,791 2,270,586,815 - 7,348,657,606
Special watch-list - - - -
Non performing loan - - - -
6,056,441,537 2,416,934,983 - 8,473,376,520
Allowance for impairment losses (9,125,361) - - (9,125,361)
Carrying amount 6,047,316,176 2,416,934,983 - 8,464,251,159
138 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time Strategic Report Strategic
Credit rating
Good debts - - - -
Normal watch-list 42,021,929,253 - - 42,021,929,253
Special watch-list - - - -
Non performing loan - - - -
42,021,929,253 - - 42,021,929,253
Allowance for impairment losses (17,938,647) - - (17,938,647)
Carrying amount 42,003,990,606 - - 42,003,990,606 Performance Operational
December 31, 2019
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts - - - -
Normal watch-list 46,208,956,979 - - 46,208,956,979 Corporate Social Social Corporate Special watch-list - - - - Responsibility
Non performing loan - - - -
46,208,956,979 - - 46,208,956,979
Allowance for impairment losses (14,438,799) - - (14,438,799)
Carrying amount 46,194,518,180 - - 46,194,518,180
December 31, 2020
Retail loans Stage 1 Stage 2 Stage 3 Total Management Risk Governance and and Governance 12-Months Life time Life time Corporate Corporate Credit rating
Good debts 29,940,799,324 - - 29,940,799,324
Normal watch-list 1,722,005,621 - - 1,722,005,621
Special watch-list - 385,422,772 - 385,422,772
Non performing loan - - 406,037,696 406,037,696
31,662,804,945 385,422,772 406,037,696 32,454,265,413 Separate Financial Separate Allowance for impairment losses (232,464,951) (100,481,753) (331,541,542) (664,488,246) Statements Carrying amount 31,430,339,994 284,941,019 74,496,154 31,789,777,167
December 31, 2019
Retail loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 24,484,169,185 - - 24,484,169,185
Normal watch-list 1,385,271,936 - - 1,385,271,936 Consolidated Statements Special watch-list - 310,867,666 - 310,867,666 Financial
Non performing loan - - 383,915,910 383,915,910
25,869,441,121 310,867,666 383,915,910 26,564,224,697
Allowance for impairment losses (146,580,951) (14,987,231) (270,879,795) (432,447,977)
Carrying amount 25,722,860,170 295,880,435 113,036,115 26,131,776,720 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 139 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 119,535,186,264 1,314,690,606 - 120,849,876,870
Normal watch-list 2,713,549,919 7,291,240,943 - 10,004,790,862
Special watch-list - 4,829,009,806 - 4,829,009,806
Non performing loan - - 4,780,630,470 4,780,630,470
122,248,736,183 13,434,941,355 4,780,630,470 140,464,308,008
Allowance for impairment losses (1,076,434,961) (3,578,274,450) (3,866,108,053) (8,520,817,464)
Carrying amount 121,172,301,222 9,856,666,905 914,522,417 131,943,490,544
December 31, 2019
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Credit rating
Good debts 119,502,379,237 1,090,294,044 - 120,592,673,281
Normal watch-list 2,193,802,876 5,025,702,629 - 7,219,505,505
Special watch-list - 2,497,533,088 - 2,497,533,088
Non performing loan - - 4,110,272,208 4,110,272,208
121,696,182,113 8,613,529,761 4,110,272,208 134,419,984,082
Allowance for impairment losses (1,195,552,396) (2,510,683,999) (3,180,871,259) (6,887,107,654)
Carrying amount 120,500,629,717 6,102,845,762 929,400,949 127,532,876,428
December 31, 2020
Debt instruments at fair value through other comprehensive Stage 1 Stage 2 Stage 3 Total income
12-Months Life time Life time
Credit rating
Good debts 1,454,586,525 - - 1,454,586,525
Normal watch-list - 400,000,000 - 400,000,000
Special watch-list - - - -
Non performing loan - - - -
1,454,586,525 400,000,000 - 1,854,586,525
Allowance for impairment losses (116,187) - - (116,187)
Carrying amount - fair value 1,454,586,525 400,000,000 - 1,854,586,525
December 31, 2019
Debt instruments at fair value through other comprehensive Stage 1 Stage 2 Stage 3 Total income
12-Months Life time Life time
Credit rating
Good debts 1,635,837,477 - - 1,635,837,477
Normal watch-list - - - -
Special watch-list - - - -
Non performing loan - - - -
1,635,837,477 - - 1,635,837,477
Allowance for impairment losses (86,639) - - (86,639)
Carrying amount - fair value 1,635,837,477 - - 1,635,837,477
140 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Debt instruments at amortized Stage 1 Stage 2 Stage 3 Total cost Strategic Report Strategic 12-Months Life time Life time
Credit rating
Good debts - - - -
Normal watch-list 47,612,579,495 - - 47,612,579,495
Special watch-list - - - -
Non performing loan - - - -
47,612,579,495 - - 47,612,579,495
Allowance for impairment losses (2,787,960) - - (2,787,960) Performance Operational Carrying amount 47,609,791,535 - - 47,609,791,535
December 31, 2019
Debt instruments at amortized Stage 1 Stage 2 Stage 3 Total cost
12-Months Life time Life time
Credit rating
Good debts - - - - Social Corporate Responsibility Normal watch-list 40,951,128,217 - - 40,951,128,217
Special watch-list - - - -
Non performing loan - - - -
40,951,128,217 - - 40,951,128,217
Allowance for impairment losses (13,500,616) - - (13,500,616)
Carrying amount 40,937,627,601 - - 40,937,627,601 Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 141 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
The following table shows changes in impairment credit losses between the beginning and ending of the year as a result of these factors:
December 31, 2020
Due from banks Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses at 9,125,361 - - 9,125,361 January 01, 2020
New financial assets purchased 10,607,678 - - 10,607,678 or issued
Financial assets have been matured (9,125,361) - - (9,125,361) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure - - - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 10,607,678 - - 10,607,678
December 31, 2019
Due from banks Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses at 19,083,244 - - 19,083,244 January 01, 2019
New financial assets purchased 9,125,361 - - 9,125,361 or issued
Financial assets have been matured (19,083,244) - - (19,083,244) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure - - - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 9,125,361 - - 9,125,361
142 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time Strategic Report Strategic
Allowance for impairment losses at 14,438,799 - - 14,438,799 January 01, 2020
New financial assets purchased 17,938,647 - - 17,938,647 or issued
Financial assets have been matured (14,438,799) - - (14,438,799) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - - Performance Transfer to stage 3 - - - - Operational
Changes in the probability of failure - - - - and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - Corporate Social Social Corporate
differences Responsibility
Balance at the end of the year 17,938,647 - - 17,938,647
December 31, 2019
Treasury bills Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses at 30,548,616 - - 30,548,616 January 01, 2019 Risk Management Risk New financial assets purchased 14,438,799 - - 14,438,799 and Governance
or issued Corporate
Financial assets have been matured (30,548,616) - - (30,548,616) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure - - - - Separate Financial Separate and loss in the event of failure and
the balance exposed to failure Statements
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 14,438,799 - - 14,438,799 Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 143 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Retail loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses 146,580,951 14,987,231 270,879,795 432,447,977 at January 01, 2020
Net impairment loss recognized 85,884,000 76,079,777 71,123,633 233,087,410 during the year
Loans written-off during the year - - (10,457,191) (10,457,191)
Collections of loans previously - 9,414,745 - 9,414,745 written-off
Foreign exchange translation - - (4,695) (4,695) differences
Balance at the end of the year 232,464,951 100,481,753 331,541,542 664,488,246
December 31, 2019
Retail loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time
Allowance for impairment losses 52,573,588 2,303,028 426,697,861 481,574,477 at January 01, 2019
Net impairment loss recognized 94,007,363 5,288,334 10,256,089 109,551,786 during the year
Loans written-off during the year - - (166,045,747) (166,045,747)
Collections of loans previously - 7,395,869 - 7,395,869 written-off
Foreign exchange translation - - (28,408) (28,408) differences
Balance at the end of the year 146,580,951 14,987,231 270,879,795 432,447,977
144 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time Strategic Report Strategic
Allowance for impairment losses at 1,195,552,396 2,510,683,999 3,180,871,259 6,887,107,654 January 01, 2020
New financial assets purchased 435,922,378 1,399,701,242 275,638,712 2,111,262,332 or issued
Financial assets have been matured (529,499,760) (1,099,407,181) (197,378,651) (1,826,285,592) or derecognised
Transfer to stage 1 1,645,389 (1,645,389) - -
Transfer to stage 2 (867,216,184) 867,216,184 - - Performance Transfer to stage 3 (108,964,469) (174,273,545) 283,238,014 - Operational
Changes in the probability of failure 948,995,211 75,287,390 600,501,218 1,624,783,819 and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - (66,421) (284,716,591) (284,783,012)
Collections of loans previously - 9,155,116 - 9,155,116 Corporate Social Social Corporate
written-off Responsibility
Foreign exchange translation - (8,376,945) 7,954,092 (422,853) differences
Balance at the end of the year 1,076,434,961 3,578,274,450 3,866,108,053 8,520,817,464
December 31, 2019
Corporate loans Stage 1 Stage 2 Stage 3 Total
12-Months Life time Life time Management Risk Governance and and Governance Allowance for impairment losses at 1,318,563,344 2,562,361,700 2,595,532,931 6,476,457,975 Corporate Corporate January 01, 2019
New financial assets purchased 154,201,368 1,007,169,569 - 1,161,370,937 or issued
Financial assets have been matured (323,698,647) (1,168,030,814) - (1,491,729,461) or derecognised
Transfer to stage 1 1,085,880 (1,085,880) - -
Transfer to stage 2 (34,339,561) 34,339,561 - - Financial Separate
Transfer to stage 3 (1,103,912) (83,368,566) 84,472,478 - Statements
Changes in the probability of failure 80,843,924 190,886,555 662,720,245 934,450,724 and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - (68,159,130) (68,159,130)
Collections of loans previously - 18,059,660 - 18,059,660 written-off Consolidated Statements
Foreign exchange translation - (49,647,786) (93,695,265) (143,343,051) Financial differences
Balance at the end of the year 1,195,552,396 2,510,683,999 3,180,871,259 6,887,107,654 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 145 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Debt instruments at fair value through other comprehensive Stage 1 Stage 2 Stage 3 Total income
12-Months Life time Life time
Allowance for impairment losses at 86,639 - - 86,639 January 01, 2020
New financial assets purchased - - - - or issued
Financial assets have been matured (2,667) - - (2,667) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure 32,215 - - 32,215 and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 116,187 - - 116,187
December 31, 2019
Debt instruments at fair value through other comprehensive Stage 1 Stage 2 Stage 3 Total income
12-Months Life time Life time
Allowance for impairment losses at 116,133 - - 116,133 January 01, 2019
New financial assets purchased 5,913 - - 5,913 or issued
Financial assets have been matured (9,421) - - (9,421) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Changes in the probability of failure (25,986) - - (25,986) and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 86,639 - - 86,639
146 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020
Debt instruments at amortized Stage 1 Stage 2 Stage 3 Total cost Strategic Report Strategic 12-Months Life time Life time
Allowance for impairment losses at 13,500,616 - - 13,500,616 January 01, 2020
New financial assets purchased - - - - or issued
Financial assets have been matured - - - - or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - - Performance Operational Transfer to stage 3 - - - -
Changes in the probability of failure (10,712,656) - - (10,712,656) and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - - Corporate Social Social Corporate
Foreign exchange translation - - - - Responsibility differences
Balance at the end of the year 2,787,960 - - 2,787,960
December 31, 2019
Debt instruments at amortized Stage 1 Stage 2 Stage 3 Total cost
12-Months Life time Life time
Allowance for impairment losses at 4,619,649 - - 4,619,649 Management Risk Governance and and Governance January 01, 2019 Corporate Corporate New financial assets purchased 13,500,616 - - 13,500,616 or issued
Financial assets have been matured (4,619,649) - - (4,619,649) or derecognised
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - - Financial Separate
Changes in the probability of failure - - - - Statements and loss in the event of failure and the balance exposed to failure
Changes on model assumptions and - - - - methodology
Loans written-off during the year - - - -
Foreign exchange translation - - - - differences
Balance at the end of the year 13,500,616 - - 13,500,616 Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 147 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Off balance sheet items exposed to credit risks December 31, 2020 December 31, 2019
Financial guarantees 317,500 357,500
L/Cs 2,183,629,602 3,678,811,436
Accepted papers 1,797,703,754 3,300,687,075
L/Gs 40,570,756,871 42,590,274,614
Other contingent liabilities 19,632,824 367,558,187
Total 44,572,040,551 49,937,688,812
Commitments for credit facilities have a carrying amount of EGP 31,497,891,864 at the end of current reporting year against EGP 36,638,991,924 in the prior year. The preceding table shows the maximum limit exposure to risks at the end of December 2020 and December, 2019 without taking into consideration collaterals held by the Group, if any. For financial position items, amounts stated depend on the net carrying amount shown in the financial position. The preceding table related to financial position items exposed to credit risks shows that 63% of the maximum limit exposed to credit risk at the end of current reporting year is attributable to Loans and credit facilities to customers against 63% at the end of the prior year, investments in debt instruments constitute 19% against 17% at the end of the prior year and treasury bills constitute 16% against 19% at the end of the prior year. The management is confident of its ability to maintain control on an ongoing basis and maintain the minimum credit risk resulting from loan portfolio, facilities, and debt instruments based on the following facts: – 94% of the loans and credit facilities portfolio at the end of the current reporting year comprises loans and credit facilities classified at the top 2 categories of the internal rating against 95% at the end of the prior year. – 96% of the loans and credit facilities portfolio at the end of the current reporting year not impaired against 96% at the end of the prior year. – Loans and credit facilities that are individually assessed for impairment (stage 3) at the end of the current reporting year have a carrying amount of EGP 5,186,668,166 Impairment on these loans and credit facilities represents 81% of their carrying amount. Loans and credit facilities, that are individually assessed for impairment at the end of the prior year had a carrying amount of EGP4,494,188,118 and their impairment represents 77% of such carrying amount. – The Bank applied more prudential selection process on granting loans and credit facilities during the current reporting year ended December 31, 2020. – 98% of investments in debt instruments and treasury bills at the end of the current reporting year comprise local sovereign debt instruments against 98% at the end of the prior year.
148 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/6) Loans and credit facilities Balances of loans and credit facilities in terms of credit risk rating are analyzed below:
December 31, 2020 December 31, 2019 Strategic Report Strategic Loans and credit facilities to Loans and credit facilities to Loans and credit facilities to Loans and credit facilities to customers banks customers banks
Neither have arrears nor impaired 165,212,583,679 - 153,836,995,672 -
Have arrears but not impaired 2,519,321,576 - 2,653,024,989 -
Impaired 5,186,668,166 - 4,494,188,118 -
Total 172,918,573,421 - 160,984,208,779 -
Less: Allowance for impairment (9,185,305,710) - (7,319,555,631) - losses Performance Less: Segregated interest (330,084) - (5,850,387) - Operational
Less: Unearned discount & deferred (97,135,879) - (131,610,742) - income
Net 163,635,801,748 - 153,527,192,019 -
Total credit allowance for loans and credit facilities at the end of the current reporting year amounted to EGP 9,185,305,710 (EGP 7,319,555,631 at the end of the prior year) of which EGP 4,197,649,595 represent impairment in stage three (EGP 3,451,751,054 at the end of the prior year) and EGP 4,987,656,115 represent impairment for stage one and stage two in the credit portfolio (EGP 3,867,804,577 at the end of the prior year).
Note (20-A) includes additional information on the allowance for impairment losses for Loans and credit facilities to customers during the current reporting year. Social Corporate Responsibility During the current accounting year, the loans and credit facilities portfolio increase by 7% due to the increase on lending activity. Loans and credit facilities which do not have arrears and are not subject to impairment The credit quality of Loans and credit facilities that not subject to impairment is assessed by reference to the bank’s internal rating. Loans and credit facilities to customers
December 31, 2020
Retail
Rating Overdrafts Credit cards Personal loans Real estate loans Total Risk Management Risk Governance and and Governance Good debts 3,446,431,018 902,049,238 23,635,785,228 1,956,533,840 29,940,799,324 Corporate Corporate Normal watch-list 42,845 - - - 42,845
Special watch-list 164,133 - - - 164,133
Total 3,446,637,996 902,049,238 23,635,785,228 1,956,533,840 29,941,006,302
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities Separate Financial Separate Good debts 59,683,395,528 39,015,148,615 18,420,181,364 3,510,377,634 120,629,103,141 Statements Normal watch-list 3,674,727,366 5,538,043,512 694,867,162 76,710,148 9,984,348,188
Special watch-list 1,331,847,052 2,748,760,845 573,794,907 3,723,244 4,658,126,048
Total 64,689,969,946 47,301,952,972 19,688,843,433 3,590,811,026 135,271,577,377
Guaranteed loans are not considered subject to impairment for the non-performing category after taking into consideration the collectability of the guarantees.
December 31, 2019
Retail Consolidated
Rating Overdrafts Credit cards Personal loans Real estate loans Total Statements Financial Good debts 3,450,187,264 846,011,295 18,597,924,787 1,590,045,837 24,484,169,183
Normal watch-list 388,176 - - - 388,176
Special watch-list 123,322 - - - 123,322
Total 3,450,698,762 846,011,295 18,597,924,787 1,590,045,837 24,484,680,681
Corporate Branches Network Branches Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Good debts 60,290,571,684 36,869,956,346 18,732,595,710 4,301,670,618 120,194,794,358
Normal watch-list 3,093,093,351 3,666,076,797 408,316,057 36,895,450 7,204,381,655
Special watch-list 166,366,570 1,786,772,408 - - 1,953,138,978
Total 63,550,031,605 42,322,805,551 19,140,911,767 4,338,566,068 129,352,314,991
Guaranteed loans are not considered subject to impairment for the non-performing category after taking into consideration the collectability of the guarantees.
QNB ALAHLI Annual Report 2020 — 149 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Loans and credit facilities which have arrears but are not subject to impairment These are loans and credit facilities with past-due installments but are not subject to impairment, unless information has otherwise indicated. Loans and credit facilities to customers which have arrears but are not subject to impairment are analyzed below.
December 31, 2020
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Up to 30 days - 123,084,194 1,354,893,464 134,231,339 1,612,208,997
More than 30 – 60 days - 28,602,521 218,452,027 29,919,116 276,973,664
More than 60 – 90 days - 21,227,865 172,338,722 24,472,168 218,038,755
Total - 172,914,580 1,745,684,213 188,622,623 2,107,221,416
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Up to 30 days - 95,587,735 - 42,760,839 138,348,574
More than 30 – 60 days - 24,742,361 - 19,151,152 43,893,513
More than 60 – 90 days - 12,957,380 - 1,455,369 14,412,749
More than 90 days - - - 215,445,324 215,445,324
Total - 133,287,476 - 278,812,684 412,100,160
December 31, 2019
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Up to 30 days - 94,226,249 1,158,825,914 131,831,597 1,384,883,760
More than 30 – 60 days - 25,373,887 154,895,434 14,578,370 194,847,691
More than 60 – 90 days - 8,945,942 96,720,986 10,229,727 115,896,655
Total - 128,546,078 1,410,442,334 156,639,694 1,695,628,106
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Up to 30 days - 121,337,753 - 13,037,884 134,375,637
More than 30 – 60 days - 39,038,295 - 11,963,964 51,002,259
More than 60 – 90 days - 7,922,114 - 29,862,315 37,784,429
More than 90 days - - 537,968,917 196,265,641 734,234,558
Total - 168,298,162 537,968,917 251,129,804 957,396,883
Past due loans and credit facilities are those amounts, or any part thereof, which have fallen due but for which no payment has been received in accordance with the contractual terms. These include arrears for periods more than one day. Amounts shown in the note represent the whole balance of the loan or facility and not only the past due amounts. These do not include the remaining loans and credit facilities of the same customer so long default has not fully or partially occurred on those loans. On initial recognition of Loans and credit facilities, the fair value of collaterals, if any, is assessed based on valuation methods used for similar assets but are not recog- nized in the financial statements since these do not represent assets of the bank at that date. In subsequent periods, the fair value is updated to reflect the market price or prices for similar assets.
150 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Loans and credit facilities which are individually impaired Loans and credit facilities to customers At the end of the current reporting year, the carrying amount of loans and credit facilities, that are assessed to be individually impaired (Stage 3) excluding any cash flows expected to arise from the associated guarantees, amounted to EGP 5,186,668,166 against EGP 4,494,188,118 at the end of the prior year. Strategic Report Strategic The following table provides a breakdown of the balance of such loans and credit facilities which are individually impaired including the fair value of the collaterals shall prevail when calculating the provisions.
December 31, 2020
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Loans which are individually 52,499,267 40,819,367 297,870,882 14,848,179 406,037,695 impaired
Fair value of collaterals - 6,686,662 46,503,363 960,226 54,150,251 Performance Operational
Corporate
Syndicated loans and Overdrafts Direct loans Other loans Total facilities
Loans which are individually 569,445,574 3,784,612,953 509,835 426,062,109 4,780,630,471 impaired
Fair value of collaterals - - - - - Corporate Social Social Corporate
December 31, 2019 Responsibility
Retail
Overdrafts Credit cards Personal loans Real estate loans Total
Loans which are individually 49,384,349 20,037,400 291,449,626 23,044,535 383,915,910 impaired
Fair value of collaterals - 6,985,795 86,093,496 9,801,766 102,881,057
Corporate Risk Management Risk
Syndicated loans and and Governance Overdrafts Direct loans Other loans Total facilities Corporate Corporate Loans which are individually 378,456,031 3,290,262,295 519,862 441,034,020 4,110,272,208 impaired
Fair value of collaterals - - - - -
Restructured loans and facilities: The Bank applies different types of restructuring policies to its loans and credit facilities, which include extending payment terms, executing forced management pro- grammes and applying prepayment and extension provisions to the loan. The applied restructuring policies depend on factors or criteria that indicate, in management judgment that the counterparty’s continuous payment of the loan is unlikely to occur in the absence of such restructuring policies that are subject to ongoing review. Within the bank renegotiated outstanding loans relate to long-term loans made to any type of clientele (retail and corporate loans clients). Financial Separate
Total renegotiated loans amounted to EGP 1,821,876,913 at the end of the current reporting year against EGP 735,628,769 at the end of the prior year. These balances do Statements not include any amounts whose commercial terms were renegotiated to preserve the quality of the bank’s relationship with its clients, including those terms pertaining to loans interest rates and/or loans repayment periods . The Bank practice calls for most clients whose loans have been renegotiated to be maintained in the “non-performing” category, as long as the bank remains uncertain of their ability to meet their future commitments in accordance with the definition of default under Basel II. Loans and credit facilities to customers
Corporate loans December 31, 2020 December 31, 2019
Overdrafts 53,456,549 14,813,140 Consolidated
Direct loans 1,768,420,364 720,815,629 Statements Financial Total 1,821,876,913 735,628,769
(A/7) Debt instruments, treasury bills, and other governmental notes The following table shows a breakdown of debt instruments, treasury bills, and other governmental notes (excluding allowances for impairment) per last rating for Standard and Poor’s and its equivalent:
Rating December 31, 2020 December 31, 2019
Egyptian Treasury Bills B 42,021,929,253 46,208,956,979 Branches Network Branches Fair value through other comprehensive income
Other debt instruments unrated 400,000,000 -
US Treasury Bonds AA+ 1,454,586,525 1,635,837,477
Amortized cost
Egyptian Treasury Bonds B 47,612,579,495 40,951,128,217
Total 91,489,095,273 88,795,922,673
QNB ALAHLI Annual Report 2020 — 151 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(A/8) Acquisition of collaterals During the prior reporting year, the Bank acquire foreclosed asset as acquisition of guarantees as following:
Nature of the asset Book Value
Building 7,300,000
Assets acquired were classified under other Assets in the financial position. Such Assets shall be sold, if practical.
(A/8) Concentration of risks of financial assets exposed to credit risks (Geographical segments) The following table provides a breakdown of the gross amount of the most significant credit risk limits to which the bank is exposed at the end of the current reporting year (excluding allowances for impairment). The gross amount of all financial assets including loans and credit facilities is segmented into the geographical regions of the bank’s clients except for investments in foreign treasury bonds which are reported in the “other countries” category.
Arab Republic of Egypt Other Red Sea & Upper Total Total Great Cairo Alex Delta Countries Egypt
Treasury bills 42,021,929,253 - - - 42,021,929,253 - 42,021,929,253
Loans and credit facilities to cus- tomers
Retail loans
Overdrafts 2,201,833,700 1,091,106,998 117,694,319 88,502,246 3,499,137,263 - 3,499,137,263
Credit cards 826,528,798 133,062,623 107,531,069 48,660,695 1,115,783,185 - 1,115,783,185
Personal loans 17,951,708,102 2,756,975,372 3,869,898,789 1,100,758,060 25,679,340,323 - 25,679,340,323
Real estate loans 1,653,518,330 127,272,939 168,896,048 210,317,325 2,160,004,642 - 2,160,004,642
Corporate loans
Overdrafts 48,125,954,254 8,724,308,102 5,406,874,039 3,002,279,125 65,259,415,520 - 65,259,415,520
Direct loans 34,326,114,431 7,261,140,807 7,372,766,761 2,259,831,402 51,219,853,401 - 51,219,853,401
Syndicated loans and 17,619,667,308 302,420,783 1,589,181,289 178,083,888 19,689,353,268 - 19,689,353,268 facilities
Other loans 4,290,378,009 5,307,810 - - 4,295,685,819 - 4,295,685,819
Financial derivatives - - - - - 106,092,208 106,092,208
Financial Invest- ments
Debt instruments 48,012,579,495 - - - 48,012,579,495 1,454,586,525 49,467,166,020
Other financial 2,770,365,073 81,202,523 73,726,567 23,180,482 2,948,474,645 26,737,080 2,975,211,725 assets
Total at the end of 219,800,576,753 20,482,797,957 18,706,568,881 6,911,613,223 265,901,556,814 1,587,415,813 267,488,972,627 the current Year
Total at the end of the comparative 209,831,141,991 18,218,219,447 16,676,697,552 5,914,408,466 250,640,467,456 1,746,439,982 252,386,907,438 year
152 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(Business segments) The following table provides a breakdown of the gross amount of the most significant credit risk limits to which the bank is exposed at the end of the current reporting year (excluding allowances for impairment). The gross amount of all financial assets is segmented into business sectors in which the bank’s clients operate. Strategic Report Strategic Agricultural "Industrial "Trading "Service "Governmental Foreign gov- "Other Individuals Total entities entities" institutions" institutions" sector" ernmental activities"
Treasury bills - - - - 42,021,929,253 - - - 42,021,929,253
Loans and credit facilities to customers
Retail loans
Overdrafts ------3,499,137,263 3,499,137,263
Credit cards ------1,115,783,185 1,115,783,185 Performance Operational Personal loans ------25,679,340,323 25,679,340,323
Real estate ------2,160,004,642 2,160,004,642 loans
Corporate loans
Overdrafts 964,424,958 29,472,924,980 12,720,062,710 22,102,002,872 - - - - 65,259,415,520
Direct loans 909,348,790 29,978,328,282 8,552,073,526 11,780,102,803 - - - - 51,219,853,401
Syndicated Social Corporate Responsibility loans and 38,435,752 17,489,624,053 318,039,212 1,843,254,251 - - - - 19,689,353,268 facilities
Other loans - 2,358,822,843 799,833,320 402,505,862 - - 734,523,794 - 4,295,685,819
Financial deriv------106,092,208 - 106,092,208 atives
Financial Investments
Debt instru- Risk Management Risk
- - - 400,000,000 47,612,579,495 1,454,586,525 - - 49,467,166,020 and Governance ments Corporate Corporate Other financial 7,140,100 294,616,334 80,668,245 189,173,891 2,259,552,054 22,878,403 - 121,182,698 2,975,211,725 assets
Total at the end of the current 1,919,349,600 79,594,316,492 22,470,677,013 36,717,039,679 91,894,060,802 1,477,464,928 840,616,002 32,575,448,111 267,488,972,627 Year
Total at the end of the compar- 1,934,419,135 75,075,199,644 20,978,343,395 35,314,134,791 88,962,167,126 1,661,609,086 1,771,011,814 26,690,022,447 252,386,907,438 ative year Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 153 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(B) Market Risk Market risk is the risk of losses resulting from unfavorable changes in market parameters. It contains all trading book transactions as well as some banking book portfo- lios valued using the mark-to-market approach. The bank’s policy on market risk transactions is “Prudent” in that: – Products subject to “market risk” which are offered by the Bank to its customers are restricted to cash and simple financial derivatives such as interest rate swaps and foreign exchange swap and forward contracts. – The only trading activity conducted by the Bank is over-night foreign exchange position, within a prudent limit that cannot be exceeded. – Open positions must be centrally managed and matched. The front-office managers assume primary responsibility in terms of risk exposure; however, global management lies with an independent structure being the Market Risk Controller (MRC), within Risk Division. The main function of MRC is the ongoing analysis, independently from the trading rooms, of the positions and risks linked to the market activities of the bank and the comparison of these positions to the allowed limits. The MRC carries out the following functions: – Daily and periodic analysis and reporting (independently from the front office) of the exposures, stress tests and risks incurred by the Bank’s market activities and comparison of said exposure and risks with the pre-set limits. – Definition of the risk-measurement methods and control procedures, approval of the valuation methods used to calculate and monitor risks, including those made on a gross or nominal basis. – Management of the approval process for limits. – Reviewing new products or services from market risk aspect under New Product Committee to ensure that market risks are properly identified and controlled. At the proposal of this MRC and Head of Risk Division, the Board sets the levels of authorized risk by type of market activity and makes the main decisions concerning Bank’s market risk management. (B/1) Methods of Measuring Market Risk and Defining Exposure Limits As a part of managing market risk, the Bank has several hedging strategies and enters into interest rate swaps to balance the risks inherent in debt instruments and fixed rate long term loans, if the fair value option is applied. The Bank uses a lot of methods to control market risk such as stress testing “ST”. Stress testing gives indicator of the loss volume expected that may arise from sharp adverse circumstances. Stress testing is designed to match business using standard analysis for specific scenarios. The Bank sets set a maximum limit of expected losses of 10% from authorized limit according to internal bank rules. (B/2) Stress test for foreign exchange risk The following table provides FX position (whether short or long) for all balance sheet items and off balance sheet items.
Currency Short/Long FX positions FX short positions FX long positions Expected loss at 10%
USD 123,063,426 - 123,063,426 12,306,343
EUR 6,225,350 - 6,225,350 622,535
GBP 364,317 - 364,317 36,432
JPY 21,567 - 21,567 2,157
CHF 51,348 - 51,348 5,135
DKK 79,427 - 79,427 7,943
NOK )1,100( )1,100( - )110(
SEK 32,897 - 32,897 3,290
CAD 73,534 - 73,534 7,353
AUD 9,033 - 9,033 903
AED )225,789( )225,789( - )22,579(
BHD 11,171 - 11,171 1,117
KWD 112,129 - 112,129 11,213
OMR 57,357 - 57,357 5,736
QAR 144,194 - 144,194 14,419
SAR )103,490( )103,490( - )10,349(
CNY 16,818 - 16,818 1,682
EGP )129,932,189( )129,932,189( - -
Maximum expected loss at December 31, 2020 12,993,220
Maximum expected loss at December 31, 2019 14,911,921
154 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(B/3) Foreign exchange rate volatility risk (concentration of FX risk on financial instruments) The Bank is exposed to foreign exchange rate volatility risk in terms of the financial position and cash flows. The board of directors set limits for foreign exchange risk at the total value of positions at the end of the day and during the day when timely control is exercised. The following table summarizes the bank’s exposure to the risks of fluctuations in foreign exchange rates at the end of the reporting year. This table includes the carrying amounts of the financial instruments in terms of their relevant currencies and in EGP equivalent. Report Strategic
EGP USD Euro GBP Other currencies Total
Financial assets
Cash and due from banks &Central Bank 18,102,348,261 5,625,792,617 252,966,614 110,610,795 143,376,010 24,235,094,297 of Egypt
Treasury bills 37,565,548,625 4,438,441,981 - - - 42,003,990,606
Trading investments 61,102,261 - - - - 61,102,261 Performance
Loans and credit facili- Operational 133,759,127,686 26,773,452,409 3,064,457,796 38,710,288 53,569 163,635,801,748 ties to customers
Financial derivatives - 106,092,208 - - - 106,092,208
Financial investments 47,648,700,795 2,505,994,123 1,238,572 - - 50,155,933,490
Other financial assets 2,929,205,959 38,663,702 3,272,224 5,972 161,444 2,971,309,301
Total financial assets 240,066,033,587 39,488,437,040 3,321,935,206 149,327,055 143,591,023 283,169,323,911
Financial liabilities
Due to banks 3,967,354,400 125,348,501 17,971,278 27,175,694 986,085 4,138,835,958 Social Corporate Responsibility Customer deposits 196,937,808,715 31,302,514,540 4,474,935,485 444,694,688 161,805,555 233,321,758,983
Financial derivatives 55,504,635 - - - - 55,504,635
Other loans 286,816,515 3,376,304,753 141,515,482 - - 3,804,636,750
Other financial liabilities 972,517,845 65,749,717 1,752,093 182,723 674 1,040,203,052
Total financial 202,220,002,110 34,869,917,511 4,636,174,338 472,053,105 162,792,314 242,360,939,378 liabilities
Net financial position 37,846,031,477 4,618,519,529 (1,314,239,132) (322,726,050) (19,201,291) 40,808,384,533 Risk Management Risk
At the end of the and Governance
comparative year Corporate
Total financial assets 218,815,533,788 43,954,962,314 3,112,731,451 330,975,755 134,733,772 266,348,937,080
Total financial lia- 186,604,054,452 38,895,985,937 4,673,430,066 468,995,962 148,826,176 230,791,292,593 bilities
Net financial position 32,211,479,336 5,058,976,377 (1,560,698,615) (138,020,207) (14,092,404) 35,557,644,487
(B/4) Structural Interest Rate Risk Structural interest rate risk is linked to commercial activities and corporate center transactions. Structural interest rate risk arises from residual gaps (surplus or deficit) of the bank’s fixed-rate positions. The general principle is to reduce structural interest rate risk to the maximum extent. Separate Financial Separate Whenever possible, commercial operations are hedged against interest rate, either through micro-hedging (individual hedging of each commercial transaction) or mac- ro-hedging techniques (hedging of portfolios of similar commercial transactions within the treasury department). Statements Consequently, structural interest rate risk only results from the residual positions remaining after hedging. The absence of interest rate derivative market in Egyptian Pound makes it difficult to hedge positions in this currency. Organization of the management of Structural Interest Rate risks Identification and measurement of the risk is carried out by the Assets & Liabilities Management Unit (ALMU) which comes under the authority of the Bank’s finance department. Risk assessment, limits and corrective actions are decided by the Assets & Liabilities management Committee (ALCO) headed by the Chairman with the participation of the Managing Directors, the Chief Financial Officer and the Commercial Divisions Heads, the Branch Network Head, the General Secretary and the Head of the Dealing Room. Consolidated Statements
Execution of the necessary actions decided by the ALCO for the rectification of the gaps is carried out by the dealing room through the financial market. Progress is Financial reported and notified to the ALMU/ALCO. Assets & Liabilities Management Committee (ALCO) duties – Decide on the limits for the sensitivity. – Review, validate and approve any assumptions used for the identification and measurements of the respective risks. – Review interest rate Gap and sensitivity position reported through ALMU. – Assess, amend and approve recommendations for bringing the Gap (if any) within the previously approved limits. Branches Network Branches
QNB ALAHLI Annual Report 2020 — 155 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Assets & Liabilities Management Unit (ALMU) duties – Document and maintain the respective risks management policy as approved by the ALCO. – Construct and continuously elaborate on the models used for the identification and measurement of the respective risks. – Report to ALCO on the respective exposures and the evolution of such exposures over time. – Provide recommendations for bringing the gaps within limits. – Follow up and notify ALCO of the progress made in the implementation of the ALCO decisions. Dealing Room duties – Provide frequent updates on markets movements. – Execute and Report progress of ALCO approved recommendations. – Co-ordinate with ALMU on the spontaneous hedging of special transactions according to ALCO approved policy and recommendations. Bank’s Objective of Interest Rate Risk Management The Bank’s aim is to reduce exposure to structural interest rate risk as much as possible. Any residual interest rate risk exposure must comply with the sensitivity limits approved by the ALCO. Sensitivity is defined as the variation in the net present value of future residual fixed-rate positions for a 1% parallel increase in the yield curve. Adherence to applicable limits is closely monitored. Measurement and monitoring of structural interest rate risks In order to quantify the Bank’s exposure to structural interest rate risks, all fixed rate assets and liabilities on future maturities are analyzed to identify any gaps. On a quarterly basis, assets and liabilities are analyzed independently, without any prior matching. Maturities on outstanding positions are determined on the basis of the contractual terms of the transactions and models of historic client behavior (e.g. saving accounts) as well as conventional assumptions for some balance sheet items (e.g. equity). Once the gaps have been identified for each major currency, the sensitivity is calculated as the variation of the net present value of the fixed rate position of an instan- taneous parallel shift of the 1% in the yield curve of each major currency. The cumulative sensitivity for all currencies as well as for any single currency should not exceed the above mentioned limit.
156 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
The following table summarizes the extent to which the bank is exposed to the risks of fluctuations in the interest rate including the carrying amount of the financial instruments distributed on the basis of the rate prevailing in re-pricing dates or maturity dates, whichever is earlier.
More than one More than 3 Report Strategic "At the end of the More than one year Up to one month month up to 3 months up to one More than 5 years Interest free Total current year" up to 5 years months year
Financial assets
Cash and due from Central Bank of Egypt - - - - - 17,166,858,582 17,166,858,582 (CBE)
Due from banks 1,086,106,196 3,833,293,025 499,500,000 1,149,490,000 - 499,846,494 7,068,235,715
Treasury bills 4,136,990,431 11,421,700,805 26,445,299,370 - - - 42,003,990,606 Performance
Trading investments - - - - - 61,102,261 61,102,261 Operational
Loans and credit facili- 125,878,344,610 5,916,051,894 9,367,809,239 18,213,276,218 4,260,319,787 - 163,635,801,748 ties to customers
Financial derivatives - - - - - 106,092,208 106,092,208
Financial investments
Fair value through other 400,000,004 306,394,937 - 197,169,426 951,022,158 619,795,827 2,474,382,352 comprehensive income
Amortized cost 11,718,808 2,656,719,089 4,816,128,696 32,834,579,366 7,290,645,576 - 47,609,791,535 Corporate Social Social Corporate Responsibility Fair value through profit - - - - - 71,759,603 71,759,603 or loss
Other financial assets - - - - - 2,971,309,301 2,971,309,301
Total financial assets 131,513,160,049 24,134,159,750 41,128,737,305 52,394,515,010 12,501,987,521 21,496,764,276 283,169,323,911
IRS (notional amount) 1,699,066,809 322,508,049 322,508,049 2,204,460,506 - - 4,548,543,413
Financial liabilities
Due to banks 3,898,193,466 - - - - 240,642,492 4,138,835,958 Risk Management Risk
Customer deposits 98,993,391,502 29,760,113,909 29,085,124,401 40,095,529,305 59,332,025 35,328,267,841 233,321,758,983 and Governance
Financial derivatives - - - - - 55,504,635 55,504,635 Corporate
Other loans 3,250,109,259 30,181,635 428,209,511 96,136,345 - - 3,804,636,750
Other financial liabilities - - - - - 1,040,203,052 1,040,203,052
Total financial lia- 106,141,694,227 29,790,295,544 29,513,333,912 40,191,665,650 59,332,025 36,664,618,020 242,360,939,378 bilities
IRS (notional amount) 4,548,543,413 - - - - - 4,548,543,413
Re-pricing gap 22,521,989,218 (5,333,627,745) 11,937,911,442 14,407,309,866 12,442,655,496 (15,167,853,744) 40,808,384,533 Separate Financial Separate At the end of the com- parative year Statements
Total financial assets 124,809,056,583 19,652,079,708 50,046,940,510 41,940,721,462 13,671,974,565 16,228,164,252 266,348,937,080
IRS (notional amount) - 208,538,688 208,540,000 4,637,999,000 - - 5,055,077,688
Total financial lia- 124,652,113,193 26,518,505,429 19,351,415,357 27,906,348,325 155,518,000 32,207,392,289 230,791,292,593 bilities
IRS (notional amount) 5,055,077,688 - - - - - 5,055,077,688
Re-pricing gap (4,898,134,298) (6,657,887,033) 30,904,065,153 18,672,372,137 13,516,456,565 (15,979,228,037) 35,557,644,487 Consolidated Statements
(C) Liquidity Risk Financial Liquidity risk is defined as the risk of not being able to meet cash flow or collateral requirements when they fall due and at a reasonable price. The Bank manages this exposure through modeling of its cash flow under several scenarios. Organization of Liquidity Risk Management Identification and measurement of the risk is carried out by the Assets & Liabilities Management Unit (ALMU) which comes under the authority of the bank’s Finance Department. Risk assessment and corrective actions are decided by the Assets & Liabilities Management Committee (ALCO) headed by the Chairman with the participation of the Managing Directors, the Chief Financial Officer and the Commercial Divisions Heads, the Branch Network Head, the General Secretary and the Head of the Dealing Room. Network Branches Execution of the necessary actions decided by the ALCO for the rectification of the gaps is carried out by the dealing room and/or the business lines. Progress is reported and notified to the ALMU/ALCO. Assets & Liabilities Management Committee (ALCO) duties – Review, validate and approve any assumptions and scenarios used for the identification and measurements of the respective risks. – Review the structured liquidity Gap reported by ALMU. – Assess, amend and approve recommendations for funding strategy and/or the portfolio composition for the remedy of the gaps.
QNB ALAHLI Annual Report 2020 — 157 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Assets & Liabilities Management Unit (ALMU) duties – Document and maintain the respective risks’ management policy as approved by the ALCO. – Construct and continuously elaborate on the models used for the identification and measurement of the respective risks. – Report to ALCO on the respective exposures and the evolution of such exposures over time. – Follow up and notify ALCO of the progress made in the implementation of the ALCO decisions. – Co-ordinate with the various business lines for funding needs and report potential impact on the liquidity gap. – Test and advice on the potential impact of any new product offering on the structured liquidity positions. Dealing Room duties – Is responsible for managing short term liquidity. – Provide frequent updates on markets’ status and alerting signals of liquidity stretches. – Execute and Report progress of ALCO approved recommendations. – Communicate their funding needs to ALMU for the construction of the liquidity gap. Bank’s Objective of Liquidity Risk Management – The Bank’s objective is to finance its activities at the best possible rates under normal conditions and to ensure it can meet its obligations in the event of a crisis. – To this end, the main principles of the bank’s liquidity management are as follows: – Management of the short-term liquidity in accordance with The regulatory framework; – Diversification of funding sources; – Maintenance of a portfolio of liquid assets. Measurement and monitoring of structural liquidity risks The Bank’s liquidity management framework comprises the following processes: – Regular assessment of the bank structural liquidity profile and its development over time; – Monitoring of the diversification of funding sources; – Assessment of the bank’s funding needs on the basis of the budget forecasts in order to plan appropriate funding solutions. Liquidity gaps are constructed by listing the respective on and off-balance sheet-items according to the currency of denomination and residual maturity. Maturities on outstanding assets and liabilities are determined on the basis of the contractual terms of transactions, models of historic client behavior patterns (e.g. savings accounts) as well as conventional assumptions relating to certain balance sheet items (e.g. equity). Liquidity risk Liquidity risk represents difficulty encountering the bank in meeting its financial commitments upon maturity and refurbishing amounts withdrawn. This may results in failure in fulfilling obligations related to depositors and meeting lending commitments.
December 31, 2020
More than one month More than 3 months up More than one year up Contractual maturities Up to one month More than 5 years Total up to 3 months to one year to 5 years
Financial liabilities
Due to banks 4,153,277,342 - - - - 4,153,277,342
Customer deposits 123,488,471,856 31,147,836,523 42,672,806,737 49,951,962,354 75,459,881 247,336,537,351
Other loans 306,366,733 51,754,099 798,573,394 2,739,790,756 - 3,896,484,982
Total financial 127,948,115,931 31,199,590,622 43,471,380,131 52,691,753,110 75,459,881 255,386,299,675 liabilities
› All balances shown in the table above represent the undiscounted cash flows; therefore, it is not possible to match these figures with the corresponding items in the statement of financial position. › The spot foreign exchange rate and interest rate prevailing at that date are used in the above table.
December 31, 2019
More than one month More than 3 months up More than one year up Contractual maturities Up to one month More than 5 years Total up to 3 months to one year to 5 years
Financial liabilities
Due to banks 16,050,840,383 - - - - 16,050,840,383
Customer deposits 121,153,301,172 25,147,093,882 24,583,178,821 48,513,288,805 174,957,000 219,571,819,681
Other loans 693,973,743 1,461,510,270 1,785,890,226 1,749,950,972 15,000,156 5,706,325,366
Total financial 137,898,115,298 26,608,604,152 26,369,069,047 50,263,239,778 189,957,156 241,328,985,430 liabilities
› All balances shown in the table above represent the undiscounted cash flows; therefore, it is not possible to match these figures with the corresponding items in the statement of financial position. › The spot foreign exchange rate and interest rate prevailing at that date are used in the above table. Assets available to meet all liabilities and cover loan commitments include cash, balances with Central Banks, due from banks, treasury bills, other governmental notes and Loans and credit facilities to banks and clients. Maturity term of percentage of loans to clients that are maturing within a year is extended in the normal course of the bank’s business. Moreover, some debt instruments, treasury bills and other governmental notes are pledged to cover liabilities. The Bank has the ability to meet unexpected net cash flows through selling securities, and finding other financing sources.
158 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Cash flow derivatives Derivatives settled on a gross-basis The Bank is a party to derivative contracts that are settled on a gross-basis, in particular foreign exchange derivatives. The following table shows derivative financial liabilities that shall be settled in gross distributed over the remaining period of contractual maturities at the balance sheet date. The amounts shown in the table repre- sent the undiscounted cash flows. Report Strategic
December 31, 2020
Maturities for statement of More than one month More than 3 months More than one year up Up to one month More than 5 years Total financial position items up to 3 months up to one year to 5 years
Held for trading derivatives
Foreign exchange derivatives
Cash outflows 1,684,198,546 385,649,070 1,080,225,845 - - 3,150,073,461
Cash inflows 1,677,268,363 375,195,229 1,002,865,756 - - 3,055,329,348 Performance Operational
December 31, 2019
Maturities for statement of More than one month More than 3 months More than one year up Up to one month More than 5 years Total financial position items up to 3 months up to one year to 5 years
Held for trading derivatives
Foreign exchange derivatives
Cash outflows 1,473,159,499 547,327,997 1,057,615,772 - - 3,078,103,268 Corporate Social Social Corporate Responsibility Cash inflows 1,472,146,050 537,448,106 969,969,010 - - 2,979,563,166
Cash flow for Off-balance sheet items
December 31, 2020
More than one year and less Maturities for off-balance sheet items Less than one year More than 5 years Total than 5 years Risk Management Risk
Financial guarantees 317,500 - - 317,500 and Governance
Operating lease commitments 127,355,381 393,504,249 100,460,794 621,320,424 Corporate
Capital commitments resulting from acquisition of property 997,688,233 - - 997,688,233 and equipment
Total 1,125,361,114 393,504,249 100,460,794 1,619,326,157
More than one year and less Less than one year More than 5 years Total than 5 years Separate Financial Separate Commitments for credit facilities 28,981,512,940 2,512,030,109 4,348,815 31,497,891,864 Statements
December 31, 2019
More than one year and less Maturities for off-balance sheet items Less than one year More than 5 years Total than 5 years
Financial guarantees 357,500 - - 357,500
Operating lease commitments 95,093,222 275,023,904 66,162,524 436,279,650
Capital commitments resulting from acquisition of property 956,533,263 - - 956,533,263
and equipment Consolidated Statements Financial Total 1,051,983,985 275,023,904 66,162,524 1,393,170,413
More than one year and less Less than one year More than 5 years Total than 5 years
Commitments for credit facilities 33,564,754,800 3,074,237,002 122 36,638,991,924 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 159 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(D) Fair value of financial assets and liabilities and sources of fair value (D/1) Financial instruments measured at fair value Financial assets classified as trading financial assets at fair value with changes in fair value are measured in the statement of income under ‘Net trading income’. Debt instruments classified as financial assets at fair value through other comprehensive income are measured at fair value with changes in fair value recognized in the other comprehensive income statement under “fair value reserve”. For investments in equity instruments, equity securities listed on the stock exchange are measured at fair value in accordance with quoted market prices on the date of the consolidated financial statements. For non-listed shares, except for strategic investments, they are evaluated in one of the accepted techniques: discounted cash flow method Multiples of value “and the inclusion of the valuation differences in other comprehensive income within the” fair value reserve “; for strategic investments, the nominal cost or value is the fair value of those investments. The table below shows the financial assets and liabilities at fair value in the consolidated financial statements within the fair value hierarchy, based on the levels of inputs that are essential for measuring the fair value as a whole: Level 1: The first level inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Bank can access on the measurement date. Level 2: The inputs of the second level are all inputs other than quoted prices within the first level and these inputs are observable for the asset or liability, directly or indirectly. Level 3: The third level inputs are the unobservable inputs of the asset or liability.
December 31, 2020
Financial Assets Level 1 Level 2 Level 3 Total
US Treasury bonds 1,454,586,525 - - 1,454,586,525
Other debt instruments - 400,000,000 - 400,000,000
Funds at fair value through other comprehensive income 41,970,650 - - 41,970,650
Funds at fair value through profit or loss 71,759,603 - - 71,759,603
Equity Instruments 83,418,622 - 494,406,555 577,825,177
Trading investments 61,102,261 - - 61,102,261
Financial derivatives - 106,092,208 - 106,092,208
December 31, 2019
Financial Assets Level 1 Level 2 Level 3 Total
US Treasury bonds 1,635,837,477 - - 1,635,837,477
Funds at fair value through other comprehensive income 41,521,680 - - 41,521,680
Funds at fair value through profit or loss 61,694,866 - - 61,694,866
Equity Instruments 97,190,572 - 689,338,400 786,528,972
Trading investments 84,301,673 - - 84,301,673
Financial derivatives - 83,458,859 - 83,458,859
160 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(D/2) Financial instruments not measured at fair value The following table summarizes the carrying amount and fair value of financial assets and liabilities that are not stated in the statement of financial position at fair value: Strategic Report Strategic Carrying amount Fair value
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Financial assets
Due from banks 7,068,235,715 8,464,251,159 7,068,235,715 8,464,251,159
Loans and credit facilities to customers 163,635,801,748 153,527,192,019 163,810,472,925 154,086,662,117
Financial investments at amortized Cost
Debt instruments 47,609,791,535 40,937,627,601 49,501,996,206 43,244,233,868
Financial liabilities: Performance Due to banks 4,138,835,958 16,030,665,382 4,138,835,958 16,030,665,382 Operational
Customer deposits 233,321,758,983 208,126,587,681 230,382,583,949 206,297,797,867
Other loans 3,804,636,750 5,625,017,188 3,804,636,750 5,625,017,188
Due from Banks: The carrying amount of variable interest rate placements and deposits for one day represents its fair value. For non-interest bearing balances due from banks, the car- rying amount represents their fair value. The carrying amount of fixed interest rate deposits represents their fair value since the maturity of these deposits is less than one year.
Loans and credit facilities to customers: Social Corporate Responsibility Loans and credit facilities are stated at the statement of financial position net of allowance for impairment losses. Debt instruments at amortized cost: The fair value of debt instruments is determined at the cost charged on the “Egyptian Treasury Bonds” according to Reuters announced at the end of the financial year. Customer deposits and due to other banks: The estimated fair value for deposits of indefinite maturity, including free-interest rate deposits, represents the amount paid on demand. (E) Capital management: For capital management purposes, the Bank’s capital includes total equity as reported in the statement of financial position plus some other elements that are managed as capital. The Bank manages its capital to ensure that the following objectives are achieved: Risk Management Risk
– Compliance with the legally imposed capital requirements in Egypt; and Governance
– Protecting the Bank’s ability to continue as a going concern and enabling it to generate yield for shareholders and other parties dealing with the Bank; Corporate – Maintaining a strong capital base to enhance growth of the Bank’s operations; – Capital adequacy and uses are reviewed by the Bank’s management in accordance with the requirements of the regulatory authority represented by the Central Bank of Egypt (CBE). Data is submitted and filed with the CBE on a quarterly basis. The CBE requires the bank to comply with the following; – Maintaining EGP 500 million as a minimum requirement for the issued and paid-up capital. The Bank’s paid-up capital amounted to EGP 10,774,114,830 at the end of the current year. – Maintaining a minimum level of capital adequacy ratio of 10%, calculated as the ratio between total value of the capital elements, and the risk-weighted average of
the bank’s assets and contingent liabilities. Minimum level of capital adequacy ratio reached 12.75% after adding capital conservation buffer and Domestic Systemi- Financial Separate cally Important Banks during current year. The Bank’s capital adequacy ratio reached 21.92% at the end of the current year (December 31, 2019: 18.91%) according to Basel II. Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 161 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
The numerator in the capital adequacy ratio according to Basel II comprise the following 2 tiers: – Tier 1: basic capital which comprises paid-up capital (net of treasury stock), plus: retained earnings and reserves resulting from profit appropriations (other than general reserve for banking risks and special reserves), less: any goodwill previously recognized and any carried forward losses,plus:the carrying amount of other comprehensve income. The interim net profit was incorporated in Tier 1 capital in accordance with the decision of Central Bank of Egypt Board of Directors held on 15 February 2017. – Tier 2: subordinated capital which comprises with equivalent amount of the loans provision for debt instrument / Loans and credit facilities at stage 1 which does not exceed 1.25% from the total risk-weighted average of assets and contingent liabilities, plus: the carrying amount of subordinated loans/deposits maturing over more than 5 years (provided that such carrying amount shall be reduced by 20 % of its value in each of the last five years of their maturity), in addition to 45% from increase in fair value above the carrying amount of investments in subsidiaries and associates and 45% from special reserve. In calculating the numerator of the capital adequacy ratio, total value of Tier 2 should not exceed total value of Tier 1. Also, total value of subordinated loans (deposits) should not exceed 50 % of Tier 1. Assets are risk weighted at a range of 0 to 200%. Risk classification of these assets is based on the type of the debtor as to reflect the associated credit risk and after consideration of cash collaterals. The same treatment is applied for the off-balance sheet items which shall be adjusted to reflect the contingent nature of and potential loss on these amounts. Capital adequacy Standard had been prepared based on Basel II requirements, and Central Bank of Egypt Board of Directors had approved in its meeting held on Decem- ber 18, 2012, which had been issued on December 24, 2012 and in accordance with the instructions of the Central Bank of Egypt for the capital adequacy ratio (Basel II) issued during May 2019. The tables below summarizes the compositions of Tier 1, Tier 2 and the capital adequacy ratio based on Basel II:
December 31, 2019 According to Basel II December 31, 2020 Restated*
Tier 1 capital
Share capital 10,774,114,830 9,794,649,850
General reserve 15,104,078,670 16,083,543,650
Legal reserve 2,049,233,783 2,049,233,783
Other reserves 21,379,530 21,379,530
Retained earnings 3,238,881,600 3,238,981,600
Interim profit 7,301,759,859 -
General risk reserve 21,453,923 21,453,923
Other comprehensive income 404,690,659 524,328,450
Total deductions from capital invested (596,771,221) (642,605,412)
Total tier 1 capital 38,318,821,633 31,090,965,374
Tier 2 capital
45% from special reserve 16,761,150 16,761,150
Impairment provision for loans, debt instruments and contingent liabilities in stage one* 1,506,781,410 1,596,969,858
Total tier 2 capital 1,523,542,560 1,613,731,008
Total capital 39,842,364,193 32,704,696,382
Risk weighted assets and contingent liabilities:
Credit Risk 158,727,240,641 152,904,242,645
Market Risk 15,363,994 9,060,800
Operational Risk 22,983,763,606 20,037,457,036
Total risk weighted assets and contingent liabilities 181,726,368,241 172,950,760,481
Capital adequacy ratio for Tier 1 21.09% 17.98%
Capital adequacy ratio 21.92% 18.91%
* Provided it does not exceed 1.25% from total value of risk weighted assets and contingent liabilities. ** After 2019 profit distribution. – Based on Consolidated financial statement after the disposal of insurance activity. Leverage financial ratio Central Bank of Egypt Board of Directors had approved in its meeting held on July 7, 2015 on special supervisory instructions related to leverage ratio which maintain- ing a minimum level of leverage ratio of 3% to be reported in quarterly basis to be obligatory ratio started from year 2018. This ratio will be included in Basel requirement Tier1 in order to maintain Egyptian Banking system strong and safe, as long to keep up with best international regulato- ry treatments. Leverage financial ratio reflect relationship between Tier 1 for capital that is used in capital adequacy ratio (after exclusions) and other assets (on balance sheet and off-balance sheet) that are not risk weighted assets.
162 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Ratio Elements I- The numerator elements The numerator consists of Tier 1 for capital that is used in capital adequacy ratio (after exclusions) in accordance with the requirements of the regulatory authority represented by the Central Bank of Egypt (CBE). Strategic Report Strategic II- The denominator elements The denominator consists of all bank assets (on balance sheet and off-balance sheet) according to financial statements called “Bank exposures” which include total the following: 1- On balance sheet items after deducting some of Tier I Exclusions for capital base; 2- Derivatives contracts exposures; 3- Financing Financial papers operations exposures; 4- Off-balance sheet items (weighted by credit conversion factor)
December 31, 2019 Performance The tables below summarizes the leverage financial ratio: December 31, 2020 Operational Restated*
Tier 1 capital after exclusions 38,318,821,633 31,090,965,374
Total on-balance sheet exposures, derivatives contracts and financial papers operations. 287,795,705,007 271,343,121,990
Total exposures off-balance sheet 27,144,100,711 30,628,941,430
Total exposures on-balance sheet and off-balance sheet 314,939,805,718 301,972,063,420
Leverage financial ratio 12.17% 10.30% Corporate Social Social Corporate
* After 2019 profit distribution. Responsibility – Based on Consolidated financial statements after the disposal of insurance activity. 4- Significant accounting estimates and assumptions : In the application of the bank’s accounting policies, which are described in note 3, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting year, that have a significant Risk Management Risk risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year. and Governance a. Impairment of Loans and credit facilities (Expected Credit Loss) Corporate The Bank reviews its Loans and credit facilities portfolio, at least, on a quarterly basis. Management uses its discretionary judgment in determining whether it is neces- sary to recognize impairment loss in the income statement. This requires it to identify any reliable evidence indicating measurable decline in the expected future cash flows from loan portfolio before identifying any decline for each individual loan. This evidence includes data indicating negative change in the ability of a portfolio of borrowers to repay the bank, or local and economic circumstances related to default. On scheduling future cash flows, the management use estimates based on previous experience related to impairment of assets having similar credit risks. Such experience refers to impairment similar to that of the portfolio in question. The methods and assumptions used in estimating both the amount and timing of the future cash flows are reviewed on a regular basis to minimize any discrepancy between the estimated loss and actual loss based on management given experience.
b. Fair value of derivatives Financial Separate Fair value of derivative financial instruments not quoted in an active market is determined using valuation techniques. When these techniques (such as the pricing models) are used to determine fair value, periodic tests and review are performed on them using competent independent personnel other than those responsible for Statements the preparation of such techniques. All such models have been approved and tested prior to use to ensure that their results reflect reliable data and prices that can be compared to the market. These models use market observable data only to the extent it is practical to obtain such data, however, some areas such as credit risk related to the bank and counterparties, volatility and correlations requires management judgement. Changes in assumptions about these factors can affect the fair value of the financial instrument’s disclosure. c. Debt instrument at amortized cost: Non-derivative financial assets with fixed or determinable payments and maturity dates are classified as debt instruments at amortized cost “within the business model of financial assets held to collect contractual cash flows”. If classification of investments as amortized cost – other than stakes required to be retained by the Group in accordance with the provisions of the law – were suspended by the bank, the carrying amount of the outstanding amortized cost investements at the end of the current reporting year would have increased by EGP 1,889,416,711 Consolidated to reach the fair value with a corresponding increase in the fair value through other comprehensive income. Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 163 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
5- Segmentation analysis (5/A) Segmental analysis by activity Segment activity includes operational processes, assets used in offering banking services, management of surrounding risks and related yield. Such activity may be different from other activities. Segmentation analysis of operations according to banking activities includes: Corporate: This includes current account activities, deposits, overdrafts, loans, credit facilities, and financial derivatives to large, medium, and small entities. Individuals: This includes current account activities, deposits, savings, credit cards, personal loans, and real estate loans. Other businesses: They include other Banking activities such as fund management and insurance activity. Inter-segment activities are affected within the bank’s normal course of business. Assets and liabilities of each segment include operating assets and liabilities as shown in the bank’s balance sheet. At the end of the current year Income and expenses according to Corporate Investments Individuals Other businesses Total segmental activities (December 31, 2020)
Net interest income 5,225,353,665 1,159,111,981 3,771,566,018 4,481,315,341 14,637,347,005
Net fee and commission income 1,369,827,033 3,822,763 539,707,443 (110,763,940) 1,802,593,299
Dividend income - 35,191,190 - - 35,191,190
Net trading income 374,003,002 - 25,707,996 (287,774,139) 111,936,859
Gain on financial investments - 6,487,229 - - 6,487,229
Impairment credit losses (1,909,760,559) 7,183,261 (233,087,410) (1,236,056) (2,136,900,764)
Administrative expenses (1,568,502,060) (3,957,964) (2,140,302,776) 5,457,782 (3,707,305,018)
Other operating revenues (expenses) 131,894,056 24,887,461 (207,680,166) (130,471,132) (181,369,781)
Share of profits of associates - 156,535 - - 156,535
Profit before income tax 3,622,815,137 1,232,882,456 1,755,911,105 3,956,527,856 10,568,136,554
Income tax expense (866,518,486) (277,451,263) (395,079,998) (1,537,576,365) (3,076,626,112)
Net profit for the current year 2,756,296,651 955,431,193 1,360,831,107 2,418,951,491 7,491,510,442
Assets and liabilities according to Corporate Investments Individuals Other businesses Total segmental activities (December 31, 2020)
Segment activity assets 134,689,925,305 90,608,037,140 31,788,111,955 22,101,949,407 279,188,023,807
Unclassified assets - - - - 10,974,950,204
Total assets 134,689,925,305 90,608,037,140 31,788,111,955 22,101,949,407 290,162,974,011
Segment activity liabilities 123,603,277,942 - 110,874,549,149 10,090,244,861 244,568,071,952
Unclassified liabilities - - - - 5,958,162,986
Total liabilities 123,603,277,942 - 110,874,549,149 10,090,244,861 250,526,234,938
At the end of comparative year Income and expenses according to Corporate Investments Individuals Other businesses Total segmental activities (December 31, 2019)
Net interest income 5,781,248,347 861,115,590 3,644,514,448 3,466,074,797 13,752,953,182
Net fee and commission income 1,319,036,335 8,273,246 627,674,351 16,789,687 1,971,773,619
Dividend income - 49,611,913 - - 49,611,913
Net trading income 294,664,031 - 24,639,937 (199,555,814) 119,748,154
Gain on financial investments - 6,652,342 - - 6,652,342
Impairment credit losses (604,092,200) 7,258,344 (109,551,786) 9,225,961 (697,159,681)
Administrative expenses (1,450,787,203) (3,225,291) (2,069,482,588) 17,763,860 (3,505,731,222)
Other operating revenues (expenses) 295,142,612 46,838,956 (188,049,821) (408,436,708) (254,504,961)
Share of profits of associates - 375,949 - - 375,949
Profit before income tax 5,635,211,922 976,901,049 1,929,744,541 2,901,861,783 11,443,719,295
Income tax expense (1,268,806,654) (235,051,031) (434,396,517) (983,369,366) (2,921,623,568)
Net profit for the comparative year 4,366,405,268 741,850,018 1,495,348,024 1,918,492,417 8,522,095,727
At the end of comparative year Assets and liabilities according to Corporate Investments Individuals Other businesses Total segmental activities (December 31, 2019)
Segment activity assets 130,353,672,064 88,684,268,099 26,131,654,532 17,650,662,764 262,820,257,459
Unclassified assets - - - - 10,193,544,538
Total assets 130,353,672,064 88,684,268,099 26,131,654,532 17,650,662,764 273,013,801,997
Segment activity liabilities 105,796,404,060 - 103,868,062,330 22,753,136,343 232,417,602,733
Unclassified liabilities - - - - 5,293,161,424
Total liabilities 105,796,404,060 - 103,868,062,330 22,753,136,343 237,710,764,157
164 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(5/B) Segmental analysis by geographic area At the end of current year
Income and expenses according to geographical Red Sea / Report Strategic Great Cairo Alex Delta Head ofce Total segments (December 31, 2020) Upper Egypt
Net interest income 6,718,857,340 1,117,858,190 932,652,562 415,998,503 5,451,980,410 14,637,347,005
Net fee and commission income 1,147,329,154 193,661,674 180,638,605 101,366,515 179,597,351 1,802,593,299
Dividend income - - - - 35,191,190 35,191,190
Net trading income 248,585,661 55,892,772 104,035,772 7,756,011 (304,333,357) 111,936,859
Gain on financial investments 4,057 - - - 6,483,172 6,487,229
Impairment credit losses (1,427,250,339) (250,414,721) (331,259,876) (133,923,032) 5,947,204 (2,136,900,764) Performance
Administrative expenses (2,639,643,820) (469,642,950) (434,424,464) (214,031,923) 50,438,139 (3,707,305,018) Operational
Other operating revenues (expenses) (127,126,965) (47,301,775) (37,714,490) (13,910,215) 44,683,664 (181,369,781)
Share of profits of associates - - - - 156,535 156,535
Profit before income tax 3,920,755,088 600,053,190 413,928,109 163,255,859 5,470,144,308 10,568,136,554
Income tax expense (916,946,868) (135,011,968) (93,133,825) (36,732,568) (1,894,800,883) (3,076,626,112)
Net profit for the current year 3,003,808,220 465,041,222 320,794,284 126,523,291 3,575,343,425 7,491,510,442 Corporate Social Social Corporate Assets and liabilities according to geographical Red Sea / Responsibility Great Cairo Alex Delta Head ofce Total segments (December 31, 2020) Upper Egypt
Assets of geographical segments 129,525,884,992 19,760,250,380 17,759,147,218 6,628,293,258 116,178,996,909 289,852,572,757
Unclassified assets - - - - - 310,401,254
Total assets 129,525,884,992 19,760,250,380 17,759,147,218 6,628,293,258 116,178,996,909 290,162,974,011
Liabilities of geographical segments 187,659,679,644 29,213,379,696 18,394,732,412 5,373,858,065 7,428,539,642 248,070,189,459
Unclassified liabilities - - - - - 2,456,045,479
Total liabilities 187,659,679,644 29,213,379,696 18,394,732,412 5,373,858,065 7,428,539,642 250,526,234,938 Management Risk Governance and and Governance Corporate Corporate
At the end of comparative year Red Sea / Income and expenses according to geographical Great Cairo Alex Delta Head ofce Total Upper Egypt segments (December 31, 2019)
Net interest income 7,056,937,797 1,133,429,744 977,656,850 447,593,973 4,137,334,818 13,752,953,182
Net fee and commission income 1,122,188,456 173,627,934 172,802,867 95,767,737 407,386,625 1,971,773,619
Dividend income - - - - 49,611,913 49,611,913
Net trading income 278,542,543 38,818,590 63,553,047 10,286,016 (271,452,042) 119,748,154 Financial Separate
Gain on financial investments 21,188 - - - 6,631,154 6,652,342 Statements
Impairment credit losses (345,229,695) (232,062,411) (124,742,991) (11,628,585) 16,504,001 (697,159,681)
Administrative expenses (2,491,960,844) (433,769,798) (429,548,965) (205,816,693) 55,365,078 (3,505,731,222)
Other operating revenues (expenses) 91,257,441 (35,839,314) (40,824,893) (34,127,564) (234,970,631) (254,504,961)
Share of profits of associates - - - - 375,949 375,949
Profit before income tax 5,711,756,886 644,204,745 618,895,915 302,074,884 4,166,786,865 11,443,719,295
Income tax expense (1,272,475,697) (145,069,165) (139,349,578) (67,977,368) (1,296,751,760) (2,921,623,568)
Net profit for the comparative Consolidated 4,439,281,189 499,135,580 479,546,337 234,097,516 2,870,035,105 8,522,095,727 Statements year Financial
At the end of comparative year Red Sea / Upper Assets and liabilities according to geographical Great Cairo Alex Delta Head ofce Total Egypt segments (December 31, 2019)
Assets of geographical segments 123,577,680,650 17,702,947,372 16,056,976,028 5,763,277,378 109,574,351,471 272,675,232,899
Unclassified assets - - - - - 338,569,098 Branches Network Branches Total assets 123,577,680,650 17,702,947,372 16,056,976,028 5,763,277,378 109,574,351,471 273,013,801,997
Liabilities of geographical segments 165,121,845,368 28,086,535,998 14,931,135,008 5,568,749,741 21,677,428,638 235,385,694,753
Unclassified liabilities - - - - - 2,325,069,404
Total liabilities 165,121,845,368 28,086,535,998 14,931,135,008 5,568,749,741 21,677,428,638 237,710,764,157
Geographical Segmental analysis is based on the locations of branches through which the bank provides its services.
QNB ALAHLI Annual Report 2020 — 165 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
6 - Net interest income December 31, 2020 December 31, 2019
Interest from loans and similar income:
Loans and credit facilities:
Customers 17,320,290,614 19,557,349,707
Total 17,320,290,614 19,557,349,707
Treasury bills and bonds 12,971,107,393 11,879,104,501
Deposits and current accounts 358,918,699 928,610,714
Net interest differential on hedging instruments (IRS contracts) 87,826,489 7,469,526
Total 30,738,143,195 32,372,534,448
Cost of deposits and similar expense :
Deposits and current accounts:
Banks (669,827,351) (365,100,542)
Customers (15,068,289,563) (17,983,161,729)
Total (15,738,116,914) (18,348,262,271)
Repo arrangements (239,185,725) (51,471,289)
Other loans (123,493,551) (219,847,706)
Total (16,100,796,190) (18,619,581,266)
Net 14,637,347,005 13,752,953,182
7 - Net fee and commission income: December 31, 2020 December 31, 2019
Fee and commission income :
Credit fees and commission 1,458,990,438 1,543,432,252
Custody fees 28,535,784 29,263,782
Investment commission 22,500,009 18,947,896
Other fees 782,248,644 882,079,600
Total 2,292,274,875 2,473,723,530
Fee and commission expense:
Brokerage fees (5,295,462) (4,816,874)
Other fees (484,386,114) (497,133,037)
Total (489,681,576) (501,949,911)
Net 1,802,593,299 1,971,773,619
8 - Dividend income December 31, 2020 December 31, 2019
Equity instruments at fair value through other comprehensive income 35,191,190 49,611,913
Total 35,191,190 49,611,913
9 - Net trading income: December 31, 2020 December 31, 2019
Forex operations:
Foreign exchange trading gains ( loss ) 115,051,882 155,259,419
Investment funds held for trading 12,371,744 7,961,578
Changes in fair value of currency forward contracts (7,225,941) (32,132,645)
Changes in fair value of currency swap contracts (2,427,141) (12,473,238)
Changes in fair value IRS contracts (5,833,685) 1,133,040
Total 111,936,859 119,748,154
10 - Administrative expenses December 31, 2020 December 31, 2019
Staff cost:
Salaries and wages 1,589,823,456 1,480,565,332
Social insurance 80,389,549 106,155,140
Pension cost:
Defined contribution scheme 91,035,825 89,043,720
Other retirement benefits (Defined benefit scheme ) 64,340,167 66,879,618
1,825,588,997 1,742,643,810
Depreciation and amortization 335,245,619 289,911,992
Other administrative expenses 1,546,470,402 1,473,175,420
Total 3,707,305,018 3,505,731,222
166 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
11 - Other operating revenues (expenses) December 31, 2020 December 31, 2019
Foreign exchange differences from translation of foreign currency monetary assets and liabilities other (76,580,897) (451,249,074) than held for trading items and those classified as at fair value through profit or loss at initial recognition Strategic Report Strategic Gain on sale of property and equipment 8,164,022 2,895,344
Software cost (182,777,831) (159,676,576)
Operating lease rental expense (130,265,866) (124,395,096)
Gain on sale of foreclosed assets reverted to the bank in settlement of debts - 736,748
Other provisions (net of reversed amounts) 133,599,966 77,414,349
Finance leases revenue ,net 398,197,756 399,918,035
Other leasing revenues 30,797,674 38,767,979
Impairment loss on leased assets (247,104,064) (25,953,904) Performance Net return received from insurance activity* (137,208,664) (31,732,438) Operational
Other income (expense) 21,808,123 18,769,672
Total (181,369,781) (254,504,961)
* The following table summarise the net return received from insurance activity: December 31, 2020 December 31, 2019
Direct premium 786,530,114 704,546,534
Re-insurance premium ceded (89,268,966) (38,354,618)
Technical reserve during the year (644,819,253) (523,129,273) Corporate Social Social Corporate Outgoing re-insurance commissions 896,595 852,991 Responsibility
Other revenues 24,030,253 14,650,450
Claims paid (207,301,042) (201,335,652)
Re-insurance pay-back claim 28,982,116 26,894,901
Change in Provision for Outstanding Claims Balance (13,035,444) (5,359,161)
Impairment on receivable arising from insurance contracts (23,223,037) (10,498,610)
Total (137,208,664) (31,732,438) Risk Management Risk 12 - Impairment credit losses December 31, 2020 December 31, 2019 and Governance
Loans and credit facilities to customers (2,142,847,969) (713,643,986) Corporate
Due from banks (1,482,317) 9,957,883
Treasury bills (3,499,848) 16,109,817
Debt instruments at fair value through other comprehensive income (29,548) 29,494
Debt instruments at amortized cost 10,712,656 (8,880,967)
Other assets 246,262 (731,922)
Total (2,136,900,764) (697,159,681) Separate Financial Separate
13 - Income tax expense December 31, 2020 December 31, 2019 Statements
Current tax (3,032,145,899) (2,911,322,966)
Deferred tax (44,480,213) (10,300,602)
Total (3,076,626,112) (2,921,623,568)
Additional data on deferred tax is disclosed in note (33). Income tax expense is different from the tax that would have arisen had the statutory tax rate been applied on pre-tax accounting profit as shown below:
Profit before tax 10,568,136,554 11,443,719,295
Income tax calculated at 22.5 % tax rate 2,377,830,725 2,574,836,841 Consolidated
Tax impact for: Statements Financial Non-taxable income (104,160,235) (34,260,891)
Non-deductible expenses for tax purposes 656,319,111 330,500,975
Recognize of deferred tax assets (13,785,518) (24,780,803)
Prior-years’ tax settlements (4,938,137) 27,029,507
Provision and segregated interest 117,364,163 28,055,524
Tax deductible (10% on dividend income) 3,515,790 9,941,813 Branches Network Branches Effective income tax expense 3,032,145,899 2,911,322,966
QNB ALAHLI Annual Report 2020 — 167 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Tax Position A) QNB ALAHLI Position: A-1) Corporate Tax – The Bank’s accounts were tax-inspected and settled with respect to tax since the beginning of activity till the end of December 31, 2010. – Years 2011 and 2012 transferred to tax dispute resolution committee. – Years 2013 till 2018 have been inspected, and the due tax was paid. – Year 2019 the Bank submitted its tax return in the due date and books have not been inspected yet. A-2) Salaries Taxes – The Bank’s books have been inspected, and the due tax was paid until year 2016. – The Company has received deemed tax claim from inception for year 2017, The company objected the deemed tax at the due date and awaiting to appeal committee. – Year 2018 under inspection from the tax authority. – Year 2019 the Bank submitted its tax return in the due date and books have not been inspected yet. A-3) Stamp duties – The Bank’s books have been inspected, for all branches until July 31, 2006 and all tax was paid. – Period from July 01 ,2006 till December 31, 2018 have been inspected, and the due tax was paid. – Year 2019 the Bank submitted its tax return in the due date and books have not been inspected yet. (B) EX-MIBank Position: B-1) Corporate Tax – The Bank’s accounts were tax- inspected, and settled since the beginning of activity till November 30, 2006. B-2) Salaries Taxes – The Bank’s books have been inspected, and the due tax was paid till November 30, 2006. B-3) Stamp duties – The Bank’s books have been inspected for all branches until July 31, 2006 and all due tax was paid. – Period from August 01, 2006 till November 30, 2006 have been inspected, and the due tax was paid. (C) QNB ALAHLI Leasing Position (subsidiary company): C-1) Corporate Tax – Years from start of activity incepted until 2016, the Company was tax inspected and the tax assessment was carried out and the payment thereof was made. – Year 2017, 2018 and 2019, the company submitted its tax return on the due date and the books have not been inspected yet. C-2) Salary tax – Years from the start of activity incepted until December 31, 2016, the Company was tax inspected and the tax assessment was carried out and the payment thereof was made. – Years from 2017 to 2019, no tax inspection has been carried out up till date. C-3) Stamp duties – Years from activity inception until 2017, the Company was tax inspected and the tax assessment was carried out and the payment thereof was made. – Year 2018 and 2019 , no tax inspection has been carried out up till date. (D) QNB ALAHLI Factoring Company Position (subsidiary company): D-1) Corporate Tax – The Company is subject to income tax law No. 91 of 2005 and its executive statute and law No. 44 of 2014. – Years 2012 till 2016, the Company submitted the tax returns on the due date and this periods under inspection by tax authority. – Year 2017 , 2018 and 2019, the Company submitted the tax returns on the due date. D-2) Salary tax – The Company is not abided by deducting and delivering salary taxes, as the company’s employees are seconded by QNB ALAHLI (Major Shareholder),While the company with holds and transfers the tax for the employees appointed to the company . D-3) Stamp duties – The Company is subject to stamp duty tax law No. 111 of 1980 and amended by law 143 of period 2006 and the company not have been inspected till now. D-4) Withholding tax – The Company is committed to withholding tax and delivering it to tax authority on due dates.
168 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(E) QNB ALAHLI Life Insurance Company Position (subsidiary company): E-1) Corporate Tax – The Company has received deemed tax claim from inception till 30 June 2005. The company objected the deemed tax at the due date and transferred to appeal com- mittee. Strategic Report Strategic – Years from 1 July 2005 to 30 June 2008, the company submitted its tax return , no tax inspection has taken place. – Years from 1 July 2008 to 30 June 2012, the tax authority inspection and settlement took place and the final settlement have been made. – Years from 1 July 2012 to 30 June 2016, Tax inspection had taken place and The company approve partially on inspection result and objections point had been trans- ferred to internal committee. – Years from 1 July 2016 to 30 June 2019, the company submitted its tax return on the due dates. E-2) Salary tax – The tax authority inspection and settlement took place for the period since inception till 2010. – Years from 2011 up to 30 June 2012, the tax authority inspection took place and the company objected the results in the due dates for the periods and internal com-
mittee approved to pay the due tax. Performance Operational – Years from 2013 up to June 2017, the company deduct tax dues from employee’s salaries , it was inspected from the tax authority and they required further analysis and documents and it was inspected and waiting to inspection forms. E-3) Stamp duties – The Company’s accounts were tax-inspected and settled with respect to Tax since the beginning of activity till June 2019. (F) QNB ALAHLI Asset Management Egypt Company Position (subsidiary company): F-1) Corporate Tax – Years from 2002 till 2004, the Company has been inspected, and the due tax was paid for some items and remaining items was have been transferred to the internal committee. Corporate Social Social Corporate – Years from 2005 till 2006 have been transferred to the internal committee. Responsibility – Years from 2007 till 2010, the Company have been inspected, and the due tax was paid for some items and remaining items have been transferred to the internal committee. – Years from 2011 till 2014, prepare to inspection. – Years 2015 till 2019, the Company submitted its tax return in the due date and the books have not been inspected yet. F-2) Salaries Taxes – periods from 2002 till 2004, the tax inspection was took place and internal committee was agreed and tax claim was paid. – periods from 2005 till 2014 were inspected and finalized with no tax due. Risk Management Risk Governance and and Governance – periods from 2015 till 2018, the company received the tax dues and objected at the official legal dates and awaiting for internal Committee. Corporate Corporate – Year 2019 have not been inspected yet. F-3) Stamp duty tax: – Years from 2002 till 2010 have been inspected, and the due tax was paid. – Years from 2011 till 2016 have been inspected and the company objected the results within the legal periods. – Years 2017 till 2019, the Company submitted its tax return in the due date and the books have not been inspected yet.
14 - Earnings per share December 31, 2020 December 31, 2019 Separate Financial Separate Net profit for the year** 7,398,510,640 8,321,530,798 Statements Remuneration for the Board Members (from the year’s net profit)* (16,000,000) (16,000,000)
Staff profit share (from the year’s net profit)* (739,074,304) (832,962,180)
Profit available to shareholders 6,643,436,336 7,472,568,618
Weighted average number of the shares outstanding during the year 2,154,822,966 2,154,822,966
Earning Per Share 3.08 3.47
* Estimate amount based on Profits distribution proposal. The actual amount will be subject to the ordinary AGM approval . ** Based on separate financial statements. Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 169 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
15 - Classification and measurement of financial assets and financial liabilities The following table shows the gross financial assets and financial liabilities (excluding allowances for impairment) according to the business model classification:
Debt instruments at Equity instruments Financial instruments fair value through at fair value through December 31, 2020 Amortized cost at fair value through Total Carrying amount other comprehensive other comprehensive profit or loss income income
Cash and due from Central Bank of Egypt (CBE) 17,166,858,582 - - - 17,166,858,582
Due from banks 7,078,843,393 - - - 7,078,843,393
Treasury bills 42,021,929,253 - - - 42,021,929,253
Trading investments - - - 61,102,261 61,102,261
Loans and credit facilities to customers 172,918,573,421 - - - 172,918,573,421
Financial derivatives - - - 106,092,208 106,092,208
Fair value through other comprehensive income - 1,854,586,525 619,795,827 - 2,474,382,352
Amortized cost 47,612,579,495 - - - 47,612,579,495
Fair value through profit or loss - - - 71,759,603 71,759,603
Other financial assets 2,975,211,725 - - - 2,975,211,725
Total financial assets 289,773,995,869 1,854,586,525 619,795,827 238,954,072 292,487,332,293
Due to banks 4,138,835,958 - - - 4,138,835,958
Customer deposits 233,321,758,983 - - - 233,321,758,983
Financial derivatives - - - 55,504,635 55,504,635
Other loans 3,804,636,750 - - - 3,804,636,750
Other financial liabilities 1,040,203,052 - - - 1,040,203,052
Total financial liabilities 242,305,434,743 - - 55,504,635 242,360,939,378
Debt instruments at Equity instruments Financial instruments fair value through at fair value through December 31, 2019 Amortized cost at fair value through Total Carrying amount other comprehensive other comprehensive profit or loss income income
Cash and due from Central Bank of Egypt (CBE) 12,012,836,152 - - - 12,012,836,152
Due from banks 8,473,376,520 - - - 8,473,376,520
Treasury bills 46,208,956,979 - - - 46,208,956,979
Trading investments - - - 84,301,673 84,301,673
Loans and credit facilities to customers 160,984,208,779 - - - 160,984,208,779
Financial derivatives - - - 83,458,859 83,458,859
Fair value through other comprehensive income - 1,635,837,477 828,050,652 - 2,463,888,129
Amortized cost 40,951,128,217 - - - 40,951,128,217
Fair value through profit or loss - - - 61,694,866 61,694,866
Other financial assets 2,523,317,127 - - - 2,523,317,127
Total financial assets 271,153,823,774 1,635,837,477 828,050,652 229,455,398 273,847,167,301
Due to banks 16,030,665,382 - - - 16,030,665,382
Customer deposits 208,126,587,681 - - - 208,126,587,681
Financial derivatives - - - 45,851,553 45,851,553
Other loans 5,625,017,188 - - - 5,625,017,188
Other financial liabilities 963,170,789 - - - 963,170,789
Total financial liabilities 230,745,441,040 - - 45,851,553 230,791,292,593
* Re-measurement is related to expected credit loss adjustments, while reclassification includes adjustments to changes in measurement bases.
170 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
16 - Cash and due from Central Bank of Egypt (CBE) December 31, 2020 December 31, 2019
Cash 3,841,124,598 3,956,404,795
Balances with CBE (mandatory reserve) 13,325,733,984 8,056,431,357 Strategic Report Strategic
Total 17,166,858,582 12,012,836,152
Interest free balances 17,166,858,582 12,012,836,152
Total 17,166,858,582 12,012,836,152
17 - Due from Banks December 31, 2020 December 31, 2019
Current accounts 650,130,667 767,613,975 Performance
Deposits 6,428,712,726 7,705,762,545 Operational
7,078,843,393 8,473,376,520
Less : Allowance for impairment losses (10,607,678) (9,125,361)
Total 7,068,235,715 8,464,251,159
Balances at CBE other than those under the mandatory reserve 3,737,172,764 5,078,070,791
Local banks 2,378,845,974 2,270,586,815
Foreign Banks 962,824,655 1,124,718,914
Less : Allowance for impairment losses (10,607,678) (9,125,361) Corporate Social Social Corporate Responsibility Total 7,068,235,715 8,464,251,159
Interest free balances 499,846,494 638,653,608
Balances at floating interest rates 150,284,173 235,660,367
Balances at fixed interest rates 6,428,712,726 7,599,062,545
Less : Allowance for impairment losses (10,607,678) (9,125,361)
Total 7,068,235,715 8,464,251,159
Current balances 5,918,745,715 6,946,031,159 Risk Management Risk
Non-current balances 1,149,490,000 1,518,220,000 and Governance
Total 7,068,235,715 8,464,251,159 Corporate
Treasury bills December 31, 2020 December 31, 2019
91 days maturity 110,025,000 749,050,000
182 days maturity 5,006,875,000 5,040,225,000
More than 182 days maturity 38,938,771,770 43,359,678,100 Financial Separate
Less : Unearned interest (2,033,742,517) (2,939,996,121) Statements
42,021,929,253 46,208,956,979
Less : Allowance for impairment losses (17,938,647) (14,438,799)
Total 42,003,990,606 46,194,518,180
19 - Trading investments December 31, 2020 December 31, 2019
Mutual Fund certificates 61,102,261 84,301,673 Consolidated Statements Financial Total 61,102,261 84,301,673 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 171 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020 December 31, 2019 20 - Loans and credit Allowance for Allowance for facilities to customers Total Net Total Net impairment losses impairment losses
Individuals
Overdrafts 3,499,137,263 (54,943,886) 3,444,193,377 3,500,083,111 (66,256,164) 3,433,826,947
Credit cards 1,115,783,185 (59,584,077) 1,056,199,108 994,594,773 (19,091,483) 975,503,290
Personal loans 25,679,340,323 (504,482,004) 25,174,858,319 20,299,816,747 (320,411,469) 19,979,405,278
Real estate loans 2,160,004,642 (45,478,279) 2,114,526,363 1,769,730,066 (26,688,861) 1,743,041,205
Total (1) 32,454,265,413 (664,488,246) 31,789,777,167 26,564,224,697 (432,447,977) 26,131,776,720
Corporate including small loans for businesses
Overdrafts 65,259,415,520 (1,839,236,984) 63,420,178,536 63,928,487,636 (1,620,028,139) 62,308,459,497
Direct loans 51,219,853,401 (5,662,544,670) 45,557,308,731 45,781,366,008 (4,580,967,655) 41,200,398,353
Syndicated loans and 19,689,353,268 (624,399,516) 19,064,953,752 19,679,400,546 (567,440,941) 19,111,959,605 facilities
Other loans 4,295,685,819 (394,636,294) 3,901,049,525 5,030,729,892 (118,670,919) 4,912,058,973
Total (2) 140,464,308,008 (8,520,817,464) 131,943,490,544 134,419,984,082 (6,887,107,654) 127,532,876,428
Total loans and credit facil- 172,918,573,421 (9,185,305,710) 163,733,267,711 160,984,208,779 (7,319,555,631) 153,664,653,148 ities to customers (1+2)
Less: Segregated interest (330,084) (5,850,387)
Less: Unearned discount and (97,135,879) (131,610,742) deferred income
Net Loans and credit facilities to customers 163,635,801,748 153,527,192,019 distributed as follows:
Current balances 116,442,043,923 110,620,728,243
Non-current balances 47,193,757,825 42,906,463,776
Net Loans and credit facili- 163,635,801,748 153,527,192,019 ties to customers
172 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
20-A - Allowance for impairment losses
December 31, 2020 Strategic Report Strategic Individuals Overdrafts Credit cards Personal loans Real estate loans Total
Balance at 1 January 2020 66,256,164 19,091,483 320,411,469 26,688,861 432,447,977
Net impairment loss recognized during the year (11,312,278) 40,492,594 185,117,676 18,789,418 233,087,410
Loans written-off during the year - - (10,457,191) - (10,457,191)
Collection of loans previously written-off - - 9,414,745 - 9,414,745
Foreign exchange translation differences - - (4,695) - (4,695)
Balance at end of the year 54,943,886 59,584,077 504,482,004 45,478,279 664,488,246 Performance Operational Syndicated loans Corporate Overdrafts Direct loans Other loans Total and facilities
Balance at 1 January 2020 1,620,028,139 4,580,967,655 567,440,941 118,670,919 6,887,107,654
Net impairment loss recognized during the year 219,309,703 1,346,364,823 56,993,902 287,092,131 1,909,760,559
Loans written-off during the year - (273,657,726) - (11,125,286) (284,783,012)
Collection of loans previously written-off - 9,155,116 - - 9,155,116
Foreign exchange translation differences (100,858) (285,198) (35,327) (1,470) (422,853) Corporate Social Social Corporate
Balance at end of the year 1,839,236,984 5,662,544,670 624,399,516 394,636,294 8,520,817,464 Responsibility
Total 9,185,305,710
December 31, 2019
Individuals Overdrafts Credit cards Personal loans Real estate loans Total
Balance at beginning of the year 57,314,838 10,097,735 269,917,078 14,098,495 351,428,146
Impact of adopting IFRS 9 30,720,193 3,513,548 91,105,836 4,806,754 130,146,331 Risk Management Risk
Restated Balance at beginning of the year 88,035,031 13,611,283 361,022,914 18,905,249 481,574,477 and Governance
Net impairment loss recognized during the year 41,572,014 16,258,539 40,782,604 10,938,629 109,551,786 Corporate
Loans written-off during the year (63,350,881) (10,778,339) (88,761,510) (3,155,017) (166,045,747)
Collection of loans previously written-off - - 7,395,869 - 7,395,869
Foreign exchange translation differences - - (28,408) - (28,408)
Balance at end of the year 66,256,164 19,091,483 320,411,469 26,688,861 432,447,977
Syndicated loans and Financial Separate Corporate Overdrafts Direct loans Other loans Total facilities Statements Balance at beginning of the year 1,311,185,436 3,124,058,279 817,752,554 150,936,849 5,403,933,118
Impact of adopting IFRS 9 602,021,049 470,503,808 - - 1,072,524,857
Restated Balance at beginning of the year 1,913,206,485 3,594,562,087 817,752,554 150,936,849 6,476,457,975
Net impairment loss recognized during the year (257,824,867) 1,119,986,454 (228,262,559) (29,806,828) 604,092,200
Loans written-off during the year - (67,406,595) - (752,536) (68,159,131)
Collection of loans previously written-off - 18,059,660 - - 18,059,660
Foreign exchange translation differences (35,353,479) (84,233,951) (22,049,054) (1,706,566) (143,343,050) Consolidated Balance at end of the year Statements
1,620,028,139 4,580,967,655 567,440,941 118,670,919 6,887,107,654 Financial
Total 7,319,555,631 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 173 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
December 31, 2020 21- Financial derivatives Notional amount Assets Liabilities
(A) Held for trading
- Forward foreign exchange contracts 1,820,739,958 - 56,016,784
- Swap foreign exchange contracts 1,329,333,503 - (512,149)
Total 3,150,073,461 - 55,504,635
(B) Fair value hedge
Interest rate swap contracts 4,548,543,413 106,092,208 -
Total 4,548,543,413 106,092,208 -
Total 7,698,616,874 106,092,208 55,504,635
December 31, 2019
Notional amount Assets Liabilities
(A) Held for trading
- Forward foreign exchange contracts 1,952,471,855 - 48,790,843
- Swap foreign exchange contracts 1,125,631,413 - (2,939,290)
Total 3,078,103,268 - 45,851,553
(B) Fair value hedge
- Interest rate swap contracts 5,055,077,688 83,458,859 -
Total 5,055,077,688 83,458,859 -
Total 8,133,180,956 83,458,859 45,851,553
Forward exchange contracts represent commitments to purchase local and foreign currencies including the unexecuted part of regular-way transactions. Interest rate swap contracts represent commitments to swap fixed interest rate with variable interest rate where the physical exchange of funds is not required except in foreign ex- change swaps. The Bank’s credit risk represents the cost of potential replacement of the swaps in case other parties fail to meet their obligations. This risk is controlled on an ongoing basis in terms of fair value and percentage of contracted amounts. To control the outstanding credit risk, the Bank assesses counterparties to the contract in the same manner used in lending activities. Fair value hedge The Bank uses interest rate swap contracts to mitigate part of the risk of potential increase in fair value of its fixed rate customer deposits in foreign currencies to the extent caused by declining market interest rates. Net fair value of hedging instruments (Interest rate swap) asset amounted to EGP 106,092,208 as of December 31, 2020 (EGP 83,458,859 in the prior year). Gain result- ing from hedging instruments amounted to EGP 22,633,349 (Gain of EGP 79,662,814 in the prior year ) and Loss arose from the hedged items reached EGP 28,467,034 (Loss of EGP 78,529,774 in the prior year).
174 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
22- Financial investments
Fair value through other comprehensive income (FVTOCI) December 31, 2020 December 31, 2019
(A) Debt instruments at fair value: Strategic Report Strategic Listed Instruments in Egyptian Stock Exchange Market 400,000,000 -
Listed instruments in foreign stock exchange market 1,454,586,525 1,635,837,477
Total debt instruments measured at fair value through other comprehensive income 1,854,586,525 1,635,837,477
(B) Equity instruments at fair value:
Listed instruments in Egyptian stock exchange market 83,418,622 97,190,572
Unlisted instruments in stock exchange market 494,406,555 689,338,400
Total equity instruments measured at fair value through other comprehensive income 577,825,177 786,528,972 Performance Operational
(C) Money market funds and balanced funds:
*Unlisted instruments in stock exchange market 41,970,650 41,521,680
Total financial investments measured at fair value through other comprehensive income (1) 2,474,382,352 2,463,888,129
Amortized cost
(A) Debt instruments: Corporate Social Social Corporate
Listed instruments in stock exchange market 46,853,808,339 40,206,707,664 Responsibility
Unlisted instruments in stock exchange market 758,771,156 744,420,553
Less : Allowance for impairment losses (2,787,960) (13,500,616)
Total Debt instruments measured at amortized cost (2) 47,609,791,535 40,937,627,601
Fair value through profit or loss (FVTPL)
(A) Mutual funds:
Unlisted instruments in stock exchange market 71,759,603 61,694,866 Risk Management Risk Governance and and Governance Total equity instruments measured at fair value through profit or loss (3) 71,759,603 61,694,866 Corporate Corporate
(Total Financial investments (1+2+3 50,155,933,490 43,463,210,596
Current balances 8,190,961,534 6,980,536,929
Non-current balances 41,964,971,956 36,482,673,667
Total financial investment 50,155,933,490 43,463,210,596
Fixed interest debt instruments 49,064,378,060 42,573,465,078 Financial Separate
Variable interest debt instruments 400,000,000 - Statements
Total debt instruments 49,464,378,060 42,573,465,078 Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 175 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
The following table analyzes the movements on financial investments during the year:
Fair value through other Amortized cost comprehensive income
Balance at the beginning of the current year 2,463,888,129 40,937,627,601
Additions 400,000,000 13,386,778,875
Amortization of premium / discount (31,034,062) 114,838,988
Disposals (sale/redemption) (176,874,016) (6,825,673,000)
Translation differences resulting from monetary foreign currency denominated assets (31,094,318) (14,493,585)
Changes in fair value reserve (150,503,381) -
Change in Allowance for impairment during the year - 10,712,656
Balance at the end of the current year 2,474,382,352 47,609,791,535
The following table analyzes the movements on financial investments during the comparative year:
Fair value through other Amortized cost comprehensive income
Balance at the beginning of the comparative year 2,269,997,110 37,538,005,839
Impact of adopting IFRS 9 625,889,241 705,575,652
Additions 102,866,971 6,894,432,968
Amortization of premium / discount (40,834,978) 113,820,800
Disposals (sale/redemption) (301,385,348) (4,214,977,248)
Translation differences resulting from monetary foreign currency denominated assets (205,014,245) (85,729,794)
Changes in fair value reserve 24,457,231 -
Re-classification financial investements (12,087,853) -
Less : Expected credit loss (ECL) - (13,500,616)
Balance at the end of the comparative year 2,463,888,129 40,937,627,601
Gain on financial investments December 31, 2020 December 31, 2019
Gain on financial investments at fair value through profit or loss 6,487,229 6,652,342
Total 6,487,229 6,652,342
* The Bank’s equity instruments classified in the fair value through other comprehensive income category represent Bank subscribed stake at 5% from the total certifi- cates’ number of its QNB ALAHLI First Fund with cumulative daily return (THEMAR Money Market Fund) upon its initial offering, in addition to the Bank subscribed stake at 20% from the total certificates’ number of its QNB ALAHLI Second Fund with yearly / cumulative return (Tawazon Balanced Fund), in addition to the 20% from the total certificates’ number of its QNB ALAHLI Third Fund with yearly / cumulative return (Tadawol Equity Fund) upon its initial offering. All stakes required to be retained by the Bank until maturity of the funds in accordance with the provisions of the law, had a nominal value of EGP 5 million each.
176 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
23 - Investments in associates The following table summarizes the Bank’s holdings in its associates:
Country of Investee’s liabilities Investee’s profit Report Strategic December 31, 2020 Investee’s assets Investee’s revenues Carrying amount The Bank's stake residence (excluding equity) (loss)
Senouhi Company for Construction Materials Egypt 15,463,865 4,322,738 23,415,050 (949,347) 2,572,487 23.09% (Associate)
Total 15,463,865 4,322,738 23,415,050 (949,347) 2,572,487
Country of Investee’s liabilities Investee’s profit December 31, 2019 Investee’s assets Investee’s revenues Carrying amount The Bank's stake residence (excluding equity) (loss) Performance Senouhi Company for Operational Construction Materials Egypt 15,704,819 3,539,329 28,320,529 891,433 2,809,012 23.09% (Associate)
Total 15,704,819 3,539,329 28,320,529 891,433 2,809,012
24 - Intangible assets December 31, 2020 December 31, 2019
Software Corporate Social Social Corporate
Net book value at the beginning of the year 209,802,791 162,239,439 Responsibility
Additions 54,010,700 108,152,238
Amortization (68,563,922) (60,588,886)
Net book value at the end of the year 195,249,569 209,802,791
25 - Other assets December 31, 2020 December 31, 2019
Accrued revenues 2,975,211,725 2,523,317,127 Risk Management Risk
Pre-paid expenses 106,508,731 121,520,288 and Governance
Advance payments for acquisition of property and equipment 709,507,587 547,060,134 Corporate
Foreclosed assets reverted to the group in settlement of debts 11,469,071 13,469,071
Deposits held with others and custody 18,685,386 13,401,196
Advance payments to tax authority 31,917,652 31,807,014
Receivables arising from insurance contracts, net 5,078,147 650,275
Others 374,129,889 223,759,005
4,232,508,188 3,474,984,110 Separate Financial Separate Less : Allowance for impairment losses (3,902,424) (4,148,685) Statements Total 4,228,605,764 3,470,835,425 Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 177 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
Renovations of leased Machinery & 26 - Property and Equipment Lands and buildings Others Total assets equipment
January 1, 2019
Cost 2,454,728,193 195,906,081 790,995,496 256,519,229 3,698,148,999
Accumulated depreciation (645,841,142) (122,354,209) (564,476,580) (127,865,741) (1,460,537,672)
Net book value 1,808,887,051 73,551,872 226,518,916 128,653,488 2,237,611,327
December 31, 2019
Net book value at the beginning of the year 1,808,887,051 73,551,872 226,518,916 128,653,488 2,237,611,327
Additions 208,652,399 61,871,240 209,244,135 25,285,082 505,052,856
Disposals from property and equipment (856,362) (139,751) (18,621,355) (1,613,603) (21,231,071)
Disposals from accumulated depreciation 517,386 139,751 18,602,172 1,613,603 20,872,912
Depreciation for the year (104,060,717) (12,167,960) (92,805,984) (20,288,445) (229,323,106)
Net book value 1,913,139,757 123,255,152 342,937,884 133,650,125 2,512,982,918
January 1, 2020
Cost 2,662,524,230 257,637,570 981,618,276 280,190,708 4,181,970,784
Accumulated depreciation (749,384,473) (134,382,418) (638,680,392) (146,540,583) (1,668,987,866)
Net book value 1,913,139,757 123,255,152 342,937,884 133,650,125 2,512,982,918
December 31, 2020
Net book value at the beginning of the year 1,913,139,757 123,255,152 342,937,884 133,650,125 2,512,982,918
Additions 121,875,571 60,312,086 140,989,922 25,670,901 348,848,480
Disposals from property and equipment (1) (1,338,782) (228,055) (7,235,415) (8,802,253)
Disposals from accumulated depreciation 1 1,315,802 187,105 6,968,232 8,471,140
Depreciation for the year (109,893,212) (17,370,831) (116,695,325) (22,722,329) (266,681,697)
Net book value 1,925,122,116 166,173,427 367,191,531 136,331,514 2,594,818,588
Balances at December 31, 2020
Cost 2,784,399,800 316,610,874 1,122,380,143 298,626,194 4,522,017,011
Accumulated depreciation (859,277,684) (150,437,447) (755,188,612) (162,294,680) (1,927,198,423)
Net book value 1,925,122,116 166,173,427 367,191,531 136,331,514 2,594,818,588
178 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
27 - Due to banks December 31, 2020 December 31, 2019
Current accounts 273,078,309 886,972,602
Deposits 2,317,092,762 13,499,913,543 Strategic Report Strategic
Repos transactions 1,548,664,887 1,643,779,237
Total 4,138,835,958 16,030,665,382
Central banks 1,548,664,887 1,643,779,237
Local banks 300,012,410 13,652,248,182
Foreign banks 2,290,158,661 734,637,963
Total 4,138,835,958 16,030,665,382
Non-interest bearing balances 240,642,492 770,156,843
Variable interest rate balances 32,435,817 116,815,759 Performance Operational Fixed interest rate balances 3,865,757,649 15,143,692,780
Total 4,138,835,958 16,030,665,382
Current balances 4,138,835,958 16,030,665,382
Total 4,138,835,958 16,030,665,382
28 - Customer deposits December 31, 2020 December 31, 2019
Demand deposits 51,519,705,098 47,848,483,005 Corporate Social Social Corporate
Time deposits and call accounts 89,785,421,119 78,796,467,589 Responsibility
Term saving certificates 59,244,487,077 48,669,174,000
Saving deposits 25,588,901,501 25,615,535,989
Other deposits* 7,183,244,188 7,196,927,098
Total 233,321,758,983 208,126,587,681
Corporate deposits 122,447,209,834 104,258,525,351
Retail deposits 110,874,549,149 103,868,062,330
Total 233,321,758,983 208,126,587,681 Risk Management Risk Governance and and Governance Non-interest bearing balances 35,328,267,841 30,428,213,104 Corporate Corporate Variable interest rate balances 62,980,113,147 69,071,815,844
Fixed interest rate balances 135,013,377,995 108,626,558,733
Total 233,321,758,983 208,126,587,681
Current balances 189,418,429,446 164,120,624,876
Non-current balances 43,903,329,537 44,005,962,805
Total 233,321,758,983 208,126,587,681 Separate Financial Separate * Other deposits include deposits covering irrevocable letters of credit in the total of EGP 354,045,886 as of December 31, 2020 (December 31, 2019 EGP 256,308,432). The fair value of these deposits approximates its carrying amount. Statements
Other loans December 31, 2020 December 31, 2019
Union National Bank - 16,842,376
National Bank of Egypt 911,308 10,441,309
Commercial International Bank 33,905,556 110,911,111
European Investment Bank 156,602,702 159,283,761
Egyptian Gulf Bank - 1,050,686 Consolidated
Qatar National Bank 412,967,625 882,282,500 Statements Financial European Bank for Reconstruction and Development 2,947,872,338 4,184,973,616
Banque Misr 1,275 601,616
National Bank of Kuwait 139,926,879 141,130,213
The Micro, Small and Medium Enterprises Development Agency 112,449,067 117,500,000
Total 3,804,636,750 5,625,017,188
Current balances 1,109,612,373 3,892,151,986 Branches Network Branches Non-current balances 2,695,024,377 1,732,865,202
Total 3,804,636,750 5,625,017,188
QNB ALAHLI Annual Report 2020 — 179 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
30 - Other liabilities December 31, 2020 December 31, 2019
Accrued interest 1,040,203,052 963,170,789
Unearned revenues 98,709,675 129,643,296
Accrued expenses 818,115,220 717,335,584
Due to insurance and re-insurance companies 69,552,007 70,483,639
Sundry credit balances 1,475,537,553 1,087,458,712
Total 3,502,117,507 2,968,092,020
31 - Other provisions December 31, 2020
Foreign currencies Balance at the Formed during the Released during translation Used during the Balance at the end Description beginning of the year the year differences year of the year year + (-)
Provision for tax 219,597,223 5,172,425 (157,872,105) - (7,367,476) 59,530,067 claims
Provision for legal 18,712,516 1,755,212 (276,638) (142,283) (2,460,388) 17,588,419 claims
Provision for contin- 472,545,493 18,038,419 - (18,577) - 490,565,335 gent liabilities
Provision for fidelity 32,262,862 - (417,279) (604,183) - 31,241,400
Provision for opera- 731,024 - - - (17,122) 713,902 tional risk
Total 743,849,118 24,966,056 (158,566,022) (765,043) (9,844,986) 599,639,123
December 31, 2019
Foreign currencies Balance at the Impact of adopting Formed during the Released during translation Used during the Balance at the end Description beginning of the IFRS 9 year the year differences year of the year year + (-)
Provision for Tax 345,874,187 - 316,425 (121,643,613) - (4,949,776) 219,597,223 claims
Provision for Legal 12,767,804 - 12,442,787 - (194,441) (6,303,634) 18,712,516 claims
Provision for contin- 290,796,573 153,241,923 31,226,615 - (2,719,618) - 472,545,493 gent liabilities
Provision for fidelity 35,918,620 - - - (3,655,758) - 32,262,862
Provision for 487,587 - 243,437 - - - 731,024 operational risk
Total 685,844,771 153,241,923 44,229,264 (121,643,613) (6,569,817) (11,253,410) 743,849,118
32 - Insurance policyholders' rights December 31, 2020 December 31, 2019
Technical Reserves for Insurance activties 3,152,137,383 2,507,318,130
Provision for outstanding claims 95,198,243 82,162,799
Total 3,247,335,626 2,589,480,929
180 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
33 - Deferred income tax Deferred tax has been calculated on all temporary tax differences using the balance sheet method and using the expected tax rate at the time that the bank will recognize a benefit from assets / incurred liabilities at a tax rate of (22.5%) for the current financial year. The Group does not offset deferred tax assets and deferred tax liabilities unless the Bank has a legally enforceable right to set off current tax assets against current tax liabilities; and if the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority. Report Strategic Deferred tax assets and liabilities Below are the balances and movements of deferred tax assets and liabilities:
Balances of deferred tax assets and liabilities: Deferred tax assets Deferred tax liabilities
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Tax impact on temporary differences arising from:
Property and equipment - - (105,849,280) (91,253,799) Performance Operational Provisions (other than the provision for loan impairment) 306,881,271 327,340,677 - -
Differences in fair value of financial investments at fair value - - (99,636,191) (130,501,782) through other comprehensive income
Others 13,755,885 23,181,211 - -
Deferred tax assets (liabilities) 320,637,156 350,521,888 (205,485,471) (221,755,581)
Net balance of DTA (DTL) 115,151,685 128,766,307 Corporate Social Social Corporate Responsibility
Movement of deferred tax assets and liabilities: Deferred tax assets Deferred tax liabilities
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Beginning balance 350,521,888 307,629,856 (221,755,581) (72,650,961)
Impact of adopting IFRS 9 - 41,728,828 - (135,589,181)
DT recognized / utilized during the year (29,884,732) 1,163,204 16,270,110 (13,515,439)
Closing balance 320,637,156 350,521,888 (205,485,471) (221,755,581) Risk Management Risk Governance and and Governance Corporate Corporate Balances of deferred tax assets (liabilities) recognized directly in equity December 31, 2020 December 31, 2019
Differences in fair value of financial investments at fair value through other comprehensive income (99,636,191) (130,501,782)
Effect of changes in accounting policies - 41,728,828 Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 181 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
34 - Defined benefits obligation December 31, 2020 December 31, 2019
Amounts recognized in the statement of financial position:
Liability for post-retirement medical benefits 513,228,220 482,288,384
Amounts recognized in the income statement:
Post-retirement medical benefits 64,340,167 66,879,618
Post-retirement medical benefits obligation constitutes of:
Balances shown in the statement of financial position are represented as follows:
Present value of unfunded liabilities 365,975,012 414,628,886
Unrecognized actuarial gain 147,253,208 67,659,498
513,228,220 482,288,384
Liability movements during the year are represented as follows:
Balance at the beginning of the financial year 482,288,384 437,821,485
Current service cost 11,498,593 10,874,025
Interest cost 55,233,903 58,712,541
Actuarial losses / gain (2,392,329) (2,706,948)
Benefits paid (33,400,331) (22,412,719)
513,228,220 482,288,384
Amounts recognized in the income statement are shown below:
Current service cost 11,498,593 10,874,025
Interest cost 55,233,903 58,712,541
Actuarial losses / gain recognized during the year (2,392,329) (2,706,948)
64,340,167 66,879,618
The main actuarial assumptions used by the Bank are outlined below: December 31, 2020 December 31, 2019
Discount rate (two plans):
A-QNB ALAHLI current employees plan 14.50% 14.00%
B-Ex-MIBank retirees plan 14.50% 14.00%
QNB ALAHLI long term increase in the cost of medical care (on top of inflation) 8.00% 10.27%
Ex-MIBank long term increase in the cost of medical care (on top of inflation) 8.00% 10.27%
Sensitivities to +1% in discount rate (duration of the plan): Service cost DBO
Post-retirement medical benefits 7.88% 7.37%
35 - Issued and paid-up capital ( A ) Authorized Capital – The authorized capital amounts to EGP 15 billion. ( B ) Issued and Paid up Capital – The issued and paid up capital amounted to EGP 8,904,227,140 on December 31, 2017 representing 890,422,714 shares with a nominal value of EGP 10 each, of which 765,099,714 shares were paid in Egyptian pound and 125,323,000 shares were paid in foreign currency according to the exchange rates prevailing on the payment date. – The Extraordinary General Assembly held on February 15, 2018 decided to increase the capital from EGP 8,904,227,140 to EGP 9,794,649,850 ,an increase of EGP 890,422,710 by transferring from the general reserve. – The issued and paid up capital amounted to EGP 9,794,649,850 on December 31, 2018 representing 979,464,985 shares with a nominal value of EGP 10 each, of which 854,141,985 shares were paid in Egyptian pound and 125,323,000 shares were paid in foreign currency according to the exchange rates prevailing on the payment date. – The Extraordinary General Assembly held on February 28, 2019 decided to increase the capital from EGP 9,794,649,850 to EGP 10,774,114,830,an increase of EGP 979,464,980 by transferring from the general reserve. The official bodies has been approved this increase during the second quarter of Year 2020. – The Extraordinary General Assembly held on February 28, 2019 decided to split the face value of each share of the Bank’s capital from EGP 10 to be EGP 5. The issued and paid up capital amounted to EGP 10,774,114,830 on December 31, 2020 representing 2,154,822,966 shares with a nominal value of EGP 5 each.
182 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
36 - Reserves and retained earnings
(1) Reserves December 31, 2020 December 31, 2019
General reserve (a) 15,104,078,670 13,417,823,247 Strategic Report Strategic General banking risk reserve (b) 1,169,067 1,169,067
Legal reserve (c) 2,049,233,783 1,633,301,744
Fair value reserve (d) 404,806,848 524,415,090
Special reserve (e) 39,494,455 39,494,455
Capital reserve 21,379,530 18,489,519
General risk reserve* 21,453,923 21,453,923
Reserve for transactions under common control 4,000,483 4,000,483
Total reserves at the end of the year 17,645,616,759 15,660,147,528 Performance Operational
* In piror year accordance with the instructions of the Central Bank of Egypt to apply IFRS 9 as of January 1, 2019, the special reserve - credit and general bank risk reserve - credit and IFRS 9 credit risk are consolidated in one reserve under the name of general risk reserve. The difference between the provisions required under IFRS 9 and the provisions required in accordance with previous instructions will be deducted from the general risk reserve . Reserve movements are as follows:
(a) General reserve December 31, 2020 December 31, 2019
Balance at the beginning of the financial year 13,417,823,247 8,531,087,699
Transferred from retained earnings 2,665,720,403 4,886,735,548 Corporate Social Social Corporate Responsibility Transferred to capital increase (979,464,980) -
Balance at the end of the year 15,104,078,670 13,417,823,247
(b) General banking risk reserve
Balance at the beginning of the year 1,169,067 2,781,992
Transferred to retained earnings - (1,612,925)
Balance at the end of the year 1,169,067 1,169,067
In accordance with the instructions of the Central Bank of Egypt, the general banking risk reserve is supported annually by 10% of the value of the assets owned by the
Bank in return for debt if these assets are not disposed of within the period specified in the law. Management Risk Governance and and Governance
December 31, 2020 December 31, 2019 Corporate
(c) Legal Reserve
Balance at the beginning of the year 1,633,301,744 1,287,748,276
Transferred from the net profit of the prior year 415,932,039 345,553,468
Balance at the end of the year 2,049,233,783 1,633,301,744
According to the provisions of local laws, 5% of net profit of the year shall be transferred to a non-distributable statutory reserve until it reaches 100% of the bank’s capital. Separate Financial Separate (d) Fair Value Reserve December 31, 2020 December 31, 2019
Balance at the beginning of the year 524,415,090 (679,166,099) Statements
Impact of adopting IFRS 9 - 1,328,882,119
Deferred tax recognized as of a result of adopting IFRS 9 - (135,589,181)
Net change in fair value (Note 22) (150,503,381) 24,457,231
Impairment losses on debt instruments at fair value through other comprehensive income 29,548 (29,494)
Transferred to retained earnings - (12,087,853)
Deferred tax recognized during the year (Note 33) 30,865,591 (2,051,633)
Balance at the end of the year 404,806,848 524,415,090 Consolidated Statements (e) Special Reserve Financial The application of the CBE new basis rules of preparation and presentation of financial statements as well as the modified principles of recognition and measurement requires to restate the comparative figures of the first financial year that have been impacted by this change, including comparative figures in the balance sheet and the income statements for the previous year. as the impact of adjustment is positive, such impact was carried directly to retained earnings then transferred to the special reserve in equity and shall not be used except by approval from CBE. The following is a breakdown of the items that generated the special reserve amount:
December 31, 2020 December 31, 2019
Amortized cost method using EIR for held to maturity investments 253,607 253,607
Amortized cost method using EIR for Available-for-sale investments 393,930 393,930 Branches Network Branches
Applying the equity method on investments in associates 26,637,789 26,637,789
Deferred tax (Tax impact on adjustments) (4,249,739) (4,249,739)
Available-for-sale investments (Equity instruments) 16,458,868 16,458,868
Total 39,494,455 39,494,455
QNB ALAHLI Annual Report 2020 — 183 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
(2) Profit for the year and retained earnings December 31, 2020 December 31, 2019
Movements on retained earnings:
Balance at the beginning of year 9,848,191,979 8,243,667,987
Impact of adopting IFRS 9 - 26,389,444
Net profit of the financial year 7,491,517,830 8,522,091,359
Previous year’s profit distribution (2,154,822,966) (979,464,985)
Employees’ profit share (866,118,001) (721,808,017)
Board of directors’ remuneration (17,260,000) (14,941,250)
Transferred to capital reserve (2,890,011) (6,434,554)
Transferred to general reserve (2,665,720,403) (4,886,735,548)
Transferred to the legal reserve (415,932,039) (345,553,468)
Transferred from fair value reserve, net of tax - 9,368,086
Transferred from general banking risk reserve - 1,612,925
Balance at the end year 11,216,966,389 9,848,191,979
37 - Cash and cash equivalents For the purpose of presenting the cash flow statement, cash and cash equivalents include the following balances maturing within less than 3 months from placement or acquisition date.
December 31, 2020 December 31, 2019
Cash and balances with central banks 3,841,124,598 3,956,404,795
Due from banks in less than 3 months 5,234,653,393 6,603,156,520
Treasury bills and other governmental notes (91 days) 109,334,969 726,823,580
Total 9,185,112,960 11,286,384,895
38 - Contingent liabilities and other commitments (a) Legal claims (litigation) Several lawsuits were brought against the Bank and are still outstanding as of December 31, 2020. No provision has been formed since it is not probable that the Bank will incur losses in regard of these lawsuits. (b) Capital commitments: The Bank is a party to contracts for capital commitments amounting to EGP 997,688,233 as of December 31, 2020 (EGP 956,533,263 on December 31, 2019). These rep- resent commitments by the Bank for the purchases of buildings and equipment. Management is sufficiently confident that net profit shall be realized and finance shall be made available to cover these commitments. (c) Commitments for guarantees The Bank’s commitments for loans, guarantees and facilities are set out below:
December 31, 2020 December 31, 2019
Financial guarantees 317,500 357,500
Accepted papers 1,797,703,754 3,300,687,075
L/Gs 40,570,756,871 42,590,274,614
Import L/Cs 1,957,494,838 3,473,097,930
Export L/Cs 226,134,764 205,713,506
Other contingent liabilities 19,632,824 367,558,187
Total 44,572,040,551 49,937,688,812
(d) Commitments for credit facilities December 31, 2019 December 31, 2018
Commitments for credit facilities 31,497,891,864 36,638,991,924
(e) Commitments under operating lease contracts Total minimum rental payments for the irrevocable operating lease contracts are as follows:
December 31, 2020 December 31, 2019
Not more than one year 127,355,381 95,093,222
More than one year and less than 5 years 393,504,249 275,023,904
More than 5 years 100,460,794 66,162,524
Total 621,320,424 436,279,650
184 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
39 - Related-party transactions Qatar National Bank (Q.P.S.C.) is the ultimate parent and controlling party as at the end of the reporting year which owns 94.97% of the bank’s ordinary shares whereas the remaining 5.03% are held by other shareholders.
A number of transactions have been conducted during the reporting year with related parties within the Bank’s normal course of business. These include loans, depos- Report Strategic its, and foreign currency transactions. Related party transactions with the parent company other than the payment of dividends on ordinary shares:
QNB Group December 31, 2020 December 31, 2019
Due from banks 419,726 5,237,534
Due to banks 2,130,717,038 168,693,443
Export LC 2,513,234 6,483,525
LGs for banks 6,856,553,603 9,015,950,648
Foreign exchange derivative 1,329,333,503 989,007,803 Performance Operational Interest rate swap contracts 4,548,543,413 5,055,077,688
Other loans 412,967,625 882,282,500
A - Loans and credit facilities to related parties
Directors and other key management personnel Associates (and close family members)
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Outstanding loans at the beginning of the financial year 111 111 1,119 38 Social Corporate Responsibility Loans issued during the financial year - - - 1,081
Loans repayment during the financial year - - (1,119) -
Loans outstanding at the end of the financial year 111 111 - 1,119
Interest income on loans 15 - 57 80
* No provisions have been recognized in respect of loan provided to related parties.
Directors and other key management personnel Associates
(and close family members) Management Risk Governance and and Governance Loans and credit facilities to related parties can be ana- December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Corporate lyzed below
Overdrafts 111 111 - 1,119
Total 111 111 - 1,119
B - Deposits from related parties
Directors and other key management personnel Associates (and close family members) Separate Financial Separate December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Statements Deposits outstanding at the beginning of the financial year 62,923,605 64,394,311 10,683,248 7,305,502
Deposits placed during the year 11,381,135 5,389,712 186,507 3,382,738
Deposits repaid during the year (1,245,256) (6,860,418) (5,814,808) (4,992)
Deposits outstanding at the end of the financial year 73,059,484 62,923,605 5,054,947 10,683,248
Interest expense on deposits 2,174,975 2,474,684 232,950 304,022
Deposits from related parties can be analyzed below December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Demand deposits 10,310,095 1,593,925 1,270,166 7,084,929 Consolidated Statements
Saving accounts 91,110 91,994 - - Financial
Certificates of deposits 6,000,000 4,000,000 - -
Time deposits 56,658,279 57,237,686 3,784,781 3,598,319
Total 73,059,484 62,923,605 5,054,947 10,683,248 Branches Network Branches
QNB ALAHLI Annual Report 2020 — 185 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
C - Other transactions with related parties
Directors and other key management personnel Associates (and close family members)
December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Fee and commission income 566 14,036 32,575 157,243
Guarantees issued by the bank - - 22,929 31,799
The above guarantees comprise:
LGs - - 22,929 31,799
Total - - 22,929 31,799
The pricing for related parties’ transactions are the same for other parties. In accordance with the instructions of the Central Bank of Egypt (CBE) rules in 23 August 2011. The monthly average of net salaries and benefits for top 20 employees with the largest salaries and benefits reached EGP 8,650,786 during the current year.
40- Money Market and balanced Funds A - QNB ALAHLI First Fund with cumulative daily return (THEMAR Money Market Fund) The Bank has set up an investment fund under the name of “THEMAR” with daily accumulated interest as one of the banking activities authorized in accordance with the provisions of the Capital Market Law 95 of 1992. THEMAR initial offering was for one million certificates at nominal value of EGP 100 million, of which 50,000 certificates worth of EGP 5 million were subscribed by the bank at that time. EFG HERMES is managing this fund. Total number of the outstanding certificates at December 31, 2020 reached 11,377,254 at a total value of EGP 4,593,896,243 The Group currently holds 379,046 certifi- cates worth of EGP 153,050,815 of which EGP 20,188,951 are classified as fair value through other comprehensve income and represent 5% from the total number of certificates that were initially issued, whereas the remaining value of EGP 71,759,603 are classified as fair value through profit or loss and EGP 61,102,261 are classified as trading investments. According to the management agreement and the fund’s prospectus, the Bank shall receive fees and commissions for supervising the fund and other administrative services. Total commissions for the current year amounting to EGP 22,252,412 have been reported in the “fees and commission income” line item in the consolidated income statement. B - QNB ALAHLI Second Fund with periodly / cumulative return (Tawazon Balanced Fund) The Bank has set up an investment fund under the name of Tawazon Fund with periodic income as one of the banking activities authorized in accordance with the provisions of the Capital Market Law 95 of 1992. Tawazon initial offering was for two hundred and fifty thousand certificates amounting to EGP 25 million, of which 50,000 certificates worth of EGP 5 million were subscribed by the bank at that time. Beltone Asset Management is managing this fund. Total number of the outstanding certificates at December 31, 2020 reached 56,046 at a total value of EGP 11,868,183. The Bank currently holds 50,000 certificates worth of EGP 10,587,895 that are classified as fair value through other comprehensve income and represent 20% of the total number of certificates that were initially issued. According to the management agreement and the fund’s prospectus, the Bank shall receive fees and commissions for supervising the fund and other administrative services. Total commissions for the current year amounting to EGP 57,731 have been reported in the “fees and commission income” line item in the consolidated income statement. C - QNB ALAHLI Third Fund with periodly / cumulative return (Tadawol Equity Fund) The Bank has set up an investment fund under the name of Tadawol Fund with periodic accumulated income as one of the banking activities authorized in accordance with the provisions of the Capital Market Law 95 of 1992. Tadawol certificates were offered in a public offering amounting to EGP 25 million distributed over two hundred and fifty thousand certificates with a nominal value of EGP 100 each, subscriptions have only covered a number of one hundred and twenty five thousand certificates amounting to EGP 12.5 million, of which 50,000 certifi- cates worth of EGP 5 million were subscribed at by the bank at that time. HC Fund Manager Asset Management is managing this fund. Total number of the outstanding certificates at December 31, 2020 reached 76,895 at a total value of EGP 17,214,950 . The Bank currently holds 50,000 certificates worth of EGP 11,193,804 that are classified as fair value through other comprehensve income and represent 40% from the total number of certificates that were initially issued. According to the management agreement and the fund’s prospectus, the Bank shall receive fees and commissions for supervising the fund and other administrative services. Total commissions for the current year amounting to EGP 189,866 have been reported in the “fees and commission income” line item in the income statement.
186 — QNB ALAHLI Annual Report 2020 QNB ALAHLI S.A.E Notes to the Consolidated Financial Statement Overview For the Year Ended 31 December 2020 (All amounts are shown in Egyptian Pounds)
41 - Important Events 1- The coronavirus (“COVID-19”) pandemic is continuing across the various geographies globally, causing disruption to business and economic activities. COVID-19 has brought about uncertainties in the global economic environment. QNBAA is closely monitoring the situation through the business continuity planning and other risk management practices to manage the business disruption caused by COVID-19 outbreak on its operations and financial performance. Report Strategic Based on the uncertainties caused by COVID-19 and following the actions taken by the state regarding the co-existence procedures, QNBAA is closely following up the loan portfolio considering the relevant impact of COVID-19 on the qualitative and quantitative factors where determining the significant increase in Credit Risk is specifically done for the whole portfolio with its different economic sectors. Accordingly, QNBAA is continuing its internal protective action started in Q1 2020 by enhancing the level of provisions as well as the portfolio coverage ratio as a miti- gation plan for the COVID-19 impact on the loan portfolio. Further precautionary actions might be taken progressively in the light of the pandemic is not over yet. 2- On September 15, 2020, the Central Bank of Egypt issued the Law No. 194 of 2020, which repealed Law No. 88 of 2003 of the “Central Bank, Banking Sector and Monetary System”. The law applies for the Central Bank of Egypt and the Egyptian banking system. The addressees are bound by the provisions of the law to adjust their positions in ac- cordance with its provisions, within a period not exceeding one year from the date of its implementation, and the Board of Directors of the Central Bank may extend this Performance period for a period or for other periods not exceeding two years, The Central Bank have to issues a regulations and decisions implementing which related to it’s law. Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 187 Branches Network
188 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 189 QNB ALAHLI Branches Network
Head Ofce 1: Champollion: El Mahkama Square: Dar Champollion - 5 Champollion 5 Champollion St.- Down Town – 11111 36 El-Hegaz St.- Heliopolis - 11351- St.- Down Town – 11111 - Cairo - Cairo Cairo Tel: (202) 27707000 Tel: (202)27707000 Tel: (202)26311700 Fax: (202) 27707099 Fax: (202)27707099 Fax: (202)26311799 Head Ofce 2: Kasr El Nil: El Nozha: 54 El Batal Ahmed Abdel Aziz St.- El- 39 Kasr El Nil St.- Mostafa Kamel 7 El Hegaz Square - Heliopolis - 11361- Mohandseen - 12311 - Giza Square - Down Town - 11121 - Cairo Cairo Tel: (202) 33324100 Tel: (202)23994200 Tel: (202)27771431 Fax: (202) 33324199 Fax: (202)23994299 Fax: (202)27770676 Treasury & Dealing Room: El Manial: El Shams: Tel.: (202) 27707530 8 Mathaf El Manial St.- Manial – 11451 48 Farid Semeka St.-Heliopolis - 11351- Reuters Dealing Code: QNBE - Cairo Cairo Reuters Page: QNBE Tel: (202)25312263 Tel: (202)21805692 Bloomberg Page: QNBA Fax: (202)25312259 Fax: (202)21804093 Cairo Region Opera: Hegaz: Almaza City Center: 42 El-Gomhouria St.- Opera Square 143 & 145 Al Hegaz St.- Heliopolis - Commercial Center “City Center - Down Town - 11121 - Cairo 11361- Cairo Almaza” Unit (E1-11) - Al Multaqa Al Tel: (202)23999500 Tel: (202)26311600 Arabi District-11341- Cairo Fax: (202)23999599 Fax: (202)26311699 Almaza: Ahmed Heshmat: Ibn Maged Street: 103 El Thawra St.- Almaza - 11341 33 Ahmed Hesmat St.- Zamalek – 235 Hegaz St.- Heliopolis - 11351- Cairo -Cairo 11211- Cairo Tel: (202)26250100 Tel: (202) 24193673 Tel: (202)27281700 Fax: (202)26250199 Fax: (202) 24193681 Fax: (202)27281799 Safir: Beirut: Bab El Louq: 60 Abo Bakr El-Seddik St.- Safir Square 22 Beirut St.- Heliopolis - 11341 - Cairo 6 Falaky Square - Bab El Louq – Down – Heliopolis - 11361- Cairo Tel: (202)24563804 Town - 11121- Cairo Tel: (202)26310700 Fax: (202)24563899 Tel: (202)27919500 Fax: (202)26310799 Fax: (202)27919599 Osman Ibn Affan: Galaa Complex: 25 Osman Ibn Affan – 11341-Heliopolis Bab El Sheria: El Galaa Complex main walls – next to Tel: (202)24159724 472 Port Said St.- Bab El Sheria – 11271 Sun Mall Super Market – Abou Bakr El Fax: (202)24159679 - Cairo Sedik st. -Heliopolis - 11361 - Cairo Tel: (202)25891872 Tel: (202)22697953 Hassan Sadek: Fax: (202)25891876 Fax: (202)22699315 Awayd number (5) Hassan Sadek Basha St.- Heliopolis - 11341 - Cairo EL-Kamel Mohamed: Omar Ibn El Khattab: Tel: (202)24632000 2 El-Kamel Mohamed St.- Zamalek - 83 Omar Ibn El Khattab St. - Al Sabaa Fax: (202)24632099 11211- Cairo Omarat Heliopolis - 11769 - Cairo Tel: (202)27281600 Tel: (202)26904246 El Merghany: Fax: (202)27281699 95 D Borg El Shams Buildings, Al Sayed Farid Semeka: Merghany St.- Heliopolis - 11341- Cairo El-Sayeda Zeinab: 111 Farid Semeka St.- El Nozha - 11361 Tel: (202)24164800 202 Portsaid St. El Sayeda Zeinab - Cairo Fax:(202)24164899 -11461- Cairo Tel: (202)27746152 Tel: (202) 23993400 Fax: (202)27746156 Ard El Golf: Fax: (202) 23993499 5 Samir Mokhtar St.- Ard El- Golf - Triumph: Heliopolis - 11341 - Cairo Kasr El-Aini: 102 Othman Ibn Affan – Heliopolis - Tel: (202)24139304 5 Elkasr Elaainy St.- Down Town - 11361- Cairo Fax: (202)24139399 11121 - Cairo Tel: (202)26311400 Tel: (202)25352100 Fax: (202)26311499 Al Sebak: Fax: (202)25352199 32 Al Andalus St.- Heliopolis -11351 - Ain Shams: Cairo Nile City: 115 Selim El Awel St.- Ain shams - Tel: (202)24562200 2005A Korniche El Nile - Nile City 11321 – Cairo Fax: (202)24562299 Towers - North Tower - Ground Floor Tel: (202)26311900 - 11221- Cairo Fax: (202)26311999 Thawra: Tel: (202)24619241 18 El-Thawra St.- Heliopolis - 11341 - Gisr El-Suez: Fax: (202)24619244 Cairo 149 Gisr El Suez St.- El Nozha - Tel: (202)24136300 Ramsis - Ghamra: Heliopolis - 11351- Cairo Fax: (202)24136349 219 Ramsis-Ghamra -11271 - Cairo Tel: (202)26371850 Tel: (202)25971100 Fax: (202)26371859 Fax: (202)25971199
190 — QNB ALAHLI Annual Report 2020 Overview
Hadayek El Kobba: Badr City: Nasr Street: 16 Waly El-Aahd St.- Saray El- Hadayek Block#29, El Mogawra 2 – District Block 1- Cross Road, Nasr and El- Mall - 11331 – Cairo No.1- in front of Russian University - Lasilky - New Maadi - 11435 - Cairo Tel: (202)24885700 Badr City - 11829 – Al Sharkia Tel: (202)27557300
Fax: (202)24885799 Tel: (202)28609130 Fax: (202)27557399 Report Strategic Fax: (202)28609162 Heliopolis: Street 9: 7 El Merghany St.- Heliopolis - 11341- El Sherouk City Plaza: Corner of Roads 9 & 79 -Maadi – 11431 Cairo Plot# 35,45 - Sherouk Entrance #1- City - Cairo Tel: (202)24163700 Plaza Mall - Cairo Suez Desert Road - Tel: (202)27683800 Fax: (202)24163799 11837 - Cairo Fax: (202)27683899 Tel: 01221751426 Helmyet El-Zaitoun: Wadi Degla: Ibn El-Hakam Square - Beet El Ezz Obour City: Wadi Degla Club - Zahraa El Maadi Towers - 11321 – Cairo Shop 34 & 35 – Obour City Club- Obour -Helwan - 11435 - Cairo Performance Tel: (202)26312000 City- 18111- Cairo Tel: (202)25195136 Operational Fax: (202)26312099 Tel: (202)46140300 Fax: (202)25195168 Fax: (202)46140399 Kasr El-Tahra: Abbas El Akkad: 62 Toman Bey St.- Helmyet El Zaiton Obour City Industrial Zone: 20 Abo El Ataheya St.- Abbas El Akkad - 11321 - Cairo Lot 1- Banks Area , Industrial Zone A Ext.- Nasr City – 11471 - Cairo Tel: (202)24560100 - Obour City - 18111 - Cairo Tel: (202)22769500 Fax: (202)24560199 Tel: (202)46140200 Fax: (202)22769599 Fax: (202)46140299 Makrizi: Ahmed Fakhry: Corporate Social Social Corporate 7 El Awhady St.- With Makrizi St.- El Mahatta Square: 40 Ahmed Fakhry St.-Block 126- 6th Responsibility Heliopolis - 11341 - Cairo 1 El-Mahatta Square- Sarayat El- Maadi District - Nasr City - 11391 - Cairo Tel: (202) 22570668 - Helwan - 11431 - Cairo Tel: (202)23546312 Fax: (202) 22570676 Tel: (202)27680000 Fax: (202)23546316 Fax: (202)27680099 Khalifa Al Mamoun: Arab Academy: 46 khalifa Al Mamoun street – Helwan: 1 Mousheer Ahmed Ismail St.- Masaken 11341-Heliopolis – Cairo 13 Mohamed Mostafa El Maraghy St. Sheraton - Arab Maritime Acadamy Tel: (202)24539192 - Helwan - 11421 - Cairo - 11361 - Cairo
Fax: (202)24539235 Tel: (202)25485600 Tel: (202)22686751 Management Risk Governance and and Governance Fax: (202)25485699 Roxy: Hassan El Maamoun: Corporate 25 Kobba St.- Roxy Sq – Heliopolis Korniche El Maadi: 108 El Mona Building Hassan El -11341- Cairo 380 Jawharet El Maadi Building - Maamoun St.- District No. 6 – Nasr City Tel: (202)24563600 Korniche El Nil - Maadi - 11431- Cairo -11391- Cairo Fax: (202)24563699 Tel: (202)25296400 Tel: (202)22769000 Fax: (202)25296499 Fax: (202)22769099 Heliolido Club - Roxy: Heliolido club - Al Maahad Al Maadi Entrance: Makram Ebeid:
Eshtrakey street - Roxy square – Plot #405 -Maadi Entrance – Cournish 86 Makram Ebeid St.- Nasr City – Financial Separate 11341-Heliopolis El Maadi –11431- Cairo 11371- Cairo Tel: (202)24504304 Tel: (202)23242700 Tel: (202)22767000 Statements Fax: (202)24504320 Fax: (202)23242799 Fax: (202)22767099 East Cairo Region: Maadi Degla: Mustafa El Nahas: Cross Roads of 218 & 231 St.- Maadi 112 Mustafa El Nahas St.- 6th District 10th of Ramadan: Degla - 11435 - Cairo – Entrance No.2 - Nasr City - 11391 Banks Area -10th of Ramadan – 44411 Tel: (202)25220600 -Cairo - Sharkia Fax: (202)25220699 Tel: (202)26703493 Tel: (2055)390300 Fax: (202)26703495 Fax: (2055)390399 Mokatam: Consolidated Statements
Corner of Road 9 & 10 El Hadaba El Olya Zaker Hussien: Financial 1st Industrial Zone - 10th of - Mokattam - 11439 - Cairo 2 Ahmed El Zomor Street – Nasr City Ramadan: Tel: (202)25031800 - 11471 - Cairo 14A Service Area - 10th of Ramadan - Fax: (202)25031899 Tel: (202)22871147 44411 - Al Sharkia Fax: (202)22871152 Tel: (2055)4392100 Zahraa EL-Maadi: Fax: (2055)4392199 Block no. 10071 - Tenth District - El- Abasia: Hadaba El Sofla - Al-Merage - El- 111 Abasia St.- 11381- Cairo Badr University: Basateen - 11439 - Cairo Tel: (202)24884000 Entertainment District – West City - Network Branches Tel: (202)24471334 Fax: (202)24884099 Badr City - 11829 – Al Sharkia Fax: (202)24471337 Tel: 01270088701 City Stars: New Maadi: Unit # 1255 , Gate 7 – Citystars Mall 48 Al Nasr Avenue - New Maadi - - Omar Ebn El Khattab St.- Nasr City - Helwan - 11435 - Cairo 11391 - Cairo Tel: (202)27067200 Tel: (202)24802480 Fax: (202)27067299 Fax: (202)24802483
QNB ALAHLI Annual Report 2020 — 191 Asmaa Fahmy: Open Air Mall Madinety: New Cairo: 2 Nozha St.- Next to Rekaba Edaria unit (3) Ground floor - Build (j) - Down Town Project - 90 St.- 5th - Nasr City - 11371 - Cairo commercial centers District in front of Settlement - New Cairo - 11835 - Cairo Tel: (202)24159725 Arabesk Mall - first phase – Madinety Tel: (202)25982200 Fax: (202)24159475 Project – 19511-New Cairo Fax: (202)25982299 Tel: 01222419666 House of Financial Affairs: Masa - New Capital: El Massah - Abdel Aziz Shenawy Cloud 9: unit #GB-04 - Capital Plaza Mall – New St.- Parade Area - Nasr City - 11371 Unit # (6) “Cloud Nine Mall”- Northern Administrative Capital - 11865 – New -Cairo Investors area- “Mohamed Naguib Cairo Tel: (202)24010496 Axis” – 1st Settlement – 11865-New Tel: 01270103339 Cairo. Nasr City: Al Rebat - New Cairo: Tel: (202)25391021 2 Abbas El Akkad St.- Nasr City - 11371- Unit #G06 - Al Rebat Mall – Northern Fax: +(202)25391024 Cairo 90th St. - 5th Settelment - 11835 – New Tel: (202)24074600 Porto Cairo: Cairo Fax: (202)24074699 Unit No. ( 50 - 5 ) Porto Cairo Mall - Tel: (202)28215651 First settlement - New Cairo – 11865 Fax: (202)28215654 El Obour Building: - Cairo Shop # 6 & 7, building # 7 El Obor Egypt Air: Tel: 01065596125 Building, Salah Salem St.- Heliopolis Egypt Air Building - South Building- - Nasr City – 11371 - Cairo Green Tower: Block 6 - Airport Road – 11776 - Cairo Tel: (202)24054024 Green Tower - 305 Road 90 “southern” Tel: (202)22679517 Fax: (202)24054021 2nd District - New Cairo -11853 - Cairo Sun City: Tel: (202)28109558 Abdalla El Araby: Store No. A28F floor F - Sun City - Fax: (202)28109559 Land No. 17 - Block 63 Taksem Seventh Masaken Sheraton – Autostorad road - District - Tayaran Street Extension - Air Force Hospital: Heliopolis - 11361 - Cairo Nasr City - 11471 -Cairo Air Force Hospital - 90th St.- Fifth Tel: (202)22650500 Tel: (202)23879396 Settlement - 11835 - New Cairo Fax: (202)22650599 Fax: (202)23879397 Tel: (202)26182205 Masaken Sheraton: Fax: (202)26182204 Tayaran: 5 Khaled Ibn El Waleed St.- Heliopolis 32 Tayaran St.- Nasr City – 11371 - Redcon: - 11361 - Cairo Cairo Build No. 140 - First Sector – City Tel: (202)26961460 Tel: (202)24078103 Center - Fifth Settlement -11835 – New Fax: (202)26961489 Fax: (202)24078199 Cairo New Nozha: Tel: (202)28114026 El-Rehab: 3A Dr. Mohamed Hussein Kamal St.- Fax: (202)28114028 Banks Area - B District – Rehab City New Nozha - 11769 - Cairo - Tagamoa - 11841 - Cairo The spot: Tel: (202)26253600 Tel: (202)26940200 Plot(49B) - Southern Investors District Fax: (202)26253699 Fax: (202)26940299 - Fifth Settlement – New Cairo – 11835 The District: – Cairo Kattameya Road: Unit No. ( 3-10 ) - Wadi Degla Club Wall Tel: (202)25734101 Building No. 2 Abrag Badr – Kattameya Beside the District – Heliopolis -11361 Fax: (202)25734104 Road - 19111- Cairo - Cairo Tel: (202)23104167 Mirage Residance: Tel: 01288418813 Fax: (202)23104170 Unit (3) - Build ( A ) Mirage Residance Air Mall: - Entertainment District - 1st Master El Sokhna Road: Store No. 1/2 Ground Floor – Air Mall Settlement - 11865 - New Cairo Shop # (2 B) Services Complex “Master Building Passengers Building No (1) - Tel: 01208888360 El-Sokhna” Cairo/ Sokhna road, next to Cairo Airport – 11776 - Cairo landing area - sign 8 km - Ein Sokhna Emerald Empire: Tel: (202)22691691 direction before toll station -19111- Unit # 23 Ground and First Floor - Fax: (202)22691694 Cairo Emerald Center - El Nakhil City - 1st Sakr Koreish: Tel: 01205556935 Settlement - 11865 – New Cairo 90 Sakr Koraish Building – Sheraton Tel: (202)25982300 Chill out El Nakhiel: Buildings - 11361 - Cairo Fax: (202)25982399 Services Complex “Chillout – El Tel: (202)26969503 Nakheil” south end of Shaheed axis Cairo Festival City: Fax: (202)26969599 road before the ring road tunnel-19111- Unit (2-086) 2nd floor - El fatim land , Sindbad: Cairo taha hesin str. – Cairo festival city 81 Joseph Tito St.- New Nozha – 11769 mall – Fifth Settlement -11835– New Madinety: - Cairo Cairo First Floor Banks Building – Tel: (202)26253700 Tel: (202)26168178 Administrative Area - First Phase - No. Fax: (202)26253799 Fax: (202)26168179 103 - 19511 – Cairo Tel: 01206628809
192 — QNB ALAHLI Annual Report 2020 Overview
Giza Region El Nil: King Faisal: Aghakhan: 5 Wessa Wassef - Borg El Riad – 12311 457 Faisal St. - 12111 - Giza 2 Horria St.- Takseem Aghakhan - - Giza Tel: (202)37891300 11241 - Cairo Tel: (202)35732095 Fax: (202)37891399
Tel: (202)22253000 Fax: (202)35732080 Report Strategic Mariottia: Fax: (202)22253099 El-Bahr El-Azam: 44 Al Haram Street - Crystal Palace Alfy: 304 Elbahr Elaazam St.- Borg El Kawsar Mall - 12111 - Giza 14 Mohamed Bek Alfy St.- Down Town - 12211 - Giza Tel: (202)33866002 - 11111 - Cairo Tel: (202)35670700 Fax: (202)33866088 Tel: (202)25970800 Fax: (202)35670799 Nasr El Din: Fax: (202)25970899 El-Galaa: 426 Al Haram St.- El Gazera El Arabia Banha: 106 El Nil St.- Agouza - 12311 - Giza Tower - Haram - 12111 - Giza 26 Saad Zaghlool St.- 13111 - Banha Tel: (202)33323300 Tel: (202)35674200 Performance Tel: (2013)3806200 Fax: (202)33323399 Fax: (202)35674299 Operational Fax: (2013)3806299 Giza: Hadayek Al Ahram: Faggalla: 62 Mohamed Bahy El Din Barakat St.- Reviera Mall - Hadayek Al Ahram – 39 Kamel Sedky St.- Faggala – El Zaher 12211 - Giza 12572-Giza - 11271 - Cairo Tel: (202)33311100 Agouza: Tel: (202) 25880656 Fax: (202)33311199 1 Aswan Square - Al Agouza - 12311 - Menyet El Serg: Messaha: Giza 173 Shoubra St.- Sahel – Shoubra - 5 Al-Messaha Square - Dokki - 12311 - Tel: (202)33000500 Corporate Social Social Corporate 11241 - Cairo Giza Fax: (202)33000599 Responsibility Tel: (202)22052454 Tel: (202)33338100 Gameat El-Dowel El-Arabia: Fax: (202)22050575 Fax: (202)33338199 9 Gameat El-Dewal El-Arabia – Al Rod El-Farag: Mohy El-Din Abou El-Ezz: Mohandseen - 12411- Giza 74 Rod El Farag St.- El Sahel – Shoubra 38 Mohy El Din St.- Dokki – 12311 - Giza Tel: (202)33003700 - 11241 - Cairo Tel: (202)37492134 Fax: (202)33003799 Tel: (202)24291000 Fax: (202)37492138 Kitkat: Fax: (202)24291099 Mourad: 5A Mohamed Roushdy St.- 8A El Risk Management Risk Shoubra: 28 Taha Hussien St.- 12211 - Giza Nabawy El Mohandes Sq.- Agouza– and Governance
53 Shobra St.- Shoubra - 11231 - Cairo Tel: (202)35684871 12411 - Giza Corporate Tel: (202)25945900 Fax: (202)35684869 Tel: (202)33080200 Fax: (202)25945999 Fax: (202)33080299 First Mall: Shoubra El-Khima: Unit # (106),35 Giza street “First Mall” Lebanon: 135, 15 May St.- El Teraa El Boulakya - – Four Seasons First Residence 30 Lebanon St.-El Mohandseen – 12411 Mansheit El Hourrya - Shoubra El Hotel-12311- Giza - Giza Khima - 13211 - Qalubiya Tel: (202) 35725643 Tel: (202)33000900
Tel: 01223990070 Fax: (202) 35725649 Fax: (202)33000999 Financial Separate
Teraa El-Bolakia: Arab Academy - Smart Village: Moustafa Mahmoud: Statements 156 El Terra El Bolakia St.- Shoubra - Arab Academy building - Smart Village 2 El Fawakeh St.- Mohandseen – 12311 11231 - Cairo -12577- Giza - Giza Tel: (202)22009738 Tel: (202)35370071 Tel: (202)33315000 Fax: (202)22009742 Fax: (202)35370073 Fax: (202)33315099 El Marwa (Boulak El Dakroor): Dandy Mall: Shehab: 57 El Sudan St.- Dokki - 12311 - Giza Dandy Mall - Cairo-Alex. Desert Road. ( 7 Shehab St.- Mohandseen - 12411 - Tel: (202)37618708 kilo 28) - 12577- Giza Giza Fax: (202)37618747 Tel: (202)35367200 Tel: (202)37618783 Consolidated Fax: (202)37617965 Statements
Fax: (202)35367299 Financial Saint Regis: Ground floor - Saint Regis Hotel - Faisal: Sphinx: Kornish El Nile - Bolak Abu Al Ela – 179 King Faisal St.- Haram - 12151 - 3 Ahmed Orabi St.- Sphinx Square - 11221-Cairo Giza 12411 - Giza Tel: (202)33891600 Tel: (202)33002500 Mossadek - Dokki: Fax: (202)33891699 Fax: (202)33002599 12 Tanzeem - 6 Mossadek St.- Dokki - 12311 - Giza Haram: Sudan: Tel: (202)33338900 360 Al- Haram St.- Haram – 12111 - 149-151 Sudan St.- Mohandseen – 12411 Network Branches Fax: (202)33338999 Giza - Giza Tel: (202)35992400 Tel: (202)33346800 Fax: (202)35992499 Fax: (202)33346899
QNB ALAHLI Annual Report 2020 — 193 Wadi El Nil: Prima Vista: Mamoura: 22 Wadi El Nil st. – Mohandseen Unit No. G9/3,F7/1 Mall Prima Vista - Royal Mall - Mamoura Road - 21421 - –12411- Giza. Block 1/9 - El-Mehwar El- Markazi - 6th Alexandria. Of October -12451 - Giza Tel: (203)3253943 October - industrial zone: Tel: (202)25983800 Fax: (203)3253954 October City - Banks Area – Industrial Fax: (202)25983899 Zone 4 - 12451 - Giza Montaza: Tel: (202) 21274300 ElMajarra: 737 El Geish Road - Mandara – 21421 - Fax: (202) 21274399 El Majarra Complex - Plot No. (12) Alex Mehwar Crazy Water – Sheikh Zayed - Tel: (203)5487619 Chillout Park: 6th of October - 12461 - Giza Fax: (203)5487932 Store No. ( 3A ) - Restaurant Compound Tel: (202)38272600 - Alex - Cairo Desert Road - 12451 - Giza Sporting: Fax: (202)38272699 Tel: (202)33783201 293 El Horreya Road - 21311- Alex Fax: (202)33783204 Sila Mall: Tel: (203)4291624 Sila Mall , Plot #2/28/B, - Mehwar Fax: (203)4291598 Park Avenue: El-Markazi - 6th of October city-12451- Unite # G/213 - Park Avenue Project - Fawzy Moaaz Street: Giza Cairo/ Alex Desert Road – 12461-Giza 74 A Fawzy Moaz St.- Semouha - 21431- Tel: (202)38274000 Tel: 01208888368 Alex Fax: (202)38274099 Tel: (203)4196700 6th of October Distinguished Smart Village: Fax: (203)4196799 District: Egyptian Exchange Building – Smart University Mall - Behind Misr Glym: Village - 6th of October - University - 6th of October - 12451 10 Abdel-Salam Aref St.- Glym - 21311 12577 - Giza -Giza - Alex Tel: (202)35371050 Tel: (202)38247514 Tel: (203)5815500 Fax: (202)35371053 Fax: (202)38247513 Fax: (203)5815599 Mazar: Mall of Arabia: Kafr El Dawar: Mazar Mall - 16th Neighborhood – Unit No. 071 H - Mall of Arabia - 6th of Building no 1 in Adghan – 50 kanal str. Sheikh zaied , 6th Of October city- October - 12451 - Giza –entrance of new bridge – kafer el 12461-Giza Tel: (202)38260229 dawar city –22221- el Behera Tel: (202)37952551 Fax: (202)38260231 governorate Fax: (202)37952554 Tel: (2045)2249000 Banks Complex Mall -West Somid : Karma 4: Fax: (2045)2249099 Service Center Neighbhood 9 , 10 – Karma Mall 4 - 17th Neighborhood West Somid - 6th of October - 12566 - Kafr Abdou: -Sheikh zaied , 6th Of October city- Giza 26 Ismaillia St.- Across Ismallia with 12461-Giza Tel: (202)38249047 Saint Geni - Kafr Abdou - 21311 -Alex Tel: (202)37862718 Fax: (202)38249048 Tel: (203)5419560 Fax: (202)37862724 Fax: (203)5419596 IDG: Arkan : IDG - Main Service area - Food court – 6 Loran: Plot (29-30-32) - Crazy Water corridor October –12451- Giza 723 Tareq El Horreya - Loran – 21411 - - Sheikh Zayed - 6th of October – 12461- Tel: (202) 38642395 Alex Giza Fax: (202) 38642398 Tel: (203)5702634 Alexandria Region Fax: (203)5702635 Strip Mall: Damanhour: Commercial Store No. 1L - Plot # 9 &10 Moustafa Kamel: 19 El Gomhoria St.- Karta - 22111 - of Auto Ville Project - Strip Mall - 16 Ibrahim Sherif St.- Mostafa Kamel - Damanhour Dahshour 21311 - Alex Tel: (2045)3370900 Road - EL Sheikh Zayed – 12857 – Giza Tel: (203)5419600 Fax: (2045)3370999 Tel: (202) 38579194 Fax: (203)5419699 Khaled Ibn El-Waleed: El Sheikh Zayed: Semouha: 631 Al Guish Avenue - Off Khaled Ibn El Al Mogawra 1 - Building 105 front of 35 Vector Emanual Square – Semouha Waleed - Miami - 21421 - Alex Zayed Hospital - 6th of October -12461 - 21431 - Alex Tel: (203)5381100 - Giza Tel: (203) 4195900 Fax: (203)5381199 Tel: (202)37944107 Fax: (203) 4195999 Fax: (202)37944109 Miami: Wabour El-Mayah: 265 Gamal Abdel Nasser Avenue – Mall 360: 243 Ahmed Ismail St.- Behind Olympic Miami - 21421 - Alex Plot # 3, 3rd neighborhood - The eastern Club Wabour El Maya - 21131 - Alex Tel: (203)5381000 tourist extension area - 6 of October – Tel: (203)4294189 Fax: (203)5381099 12451-Giza Fax: (203)4295684 Tel: (202)36104591 Roushdy: Zizenya: Fax: (202)36104594 240 El Geish Road (Kourniche) – 21311 601 El-Horaya St.- Zizenya - 21411 - - Alex Alex Tel: (203)5419500 Tel: (203)5819300 Fax: (203)5419599 Fax: (203)5819399
194 — QNB ALAHLI Annual Report 2020 Overview
Agami: El Mansoura: City Mall – Shebeen El-Kom: Gate No. 8 Agami Star Mall - Bitash - 213 El Gommuhuria St.- 35111 - Gamal Abdel Nasser Street - in front of 21221 - Alex Mansoura the Faculty of Engineering - Shebin Tel: (203)4318708 Tel: (2050)2280300 El-Kom city – 32111-Monofeya
Fax: (203)4318709 Fax: (2050)2280399 Tel: (2048)2225215 Report Strategic Fax: (2048)2226052 Ahmed Orabi Square - El Manshya: “Metawaa Mall” Belqass - Dakahlia: 6 Ahmed Orabi Square - Ksm Manshia Green Plaza Mall - Thawra street - Tanta: – 21111 – Alex Belqass city –35631- Dakahlia El- Safwa Plaza Center- El-Kady St.- Tel: (203)4885200 Tel: (2050)2780071 31111- Tanta Fax: (203)4885299 Fax: (2050)2780076 Tel: (2040)3385600 Fax: (2040)3385699 Alex Port: El Mehalla: Unit No. 6, 7 - Ground floor – 22 El Tegara School St.-31911 - Mehalla Tanta Stadium: Investment Building – Alexandria Port Tel: (2040)2281000 Al Farouk Tower - Al Geish street – Performance - 21111 - Alex Fax: (2040)2281099 Tanta stadium area - 1st district Operational Tel: (203)4833343 -31121- Tanta El Mohafza Square: Fax: (203)4877797 Tel: (2040)3352737 240 El- Geish St.- El Mohafza Sq.- Fax: (2040)3352747 Alexandria Entrance: 35111- Mansoura unit no 1,El Tarek Trade company Tel: (2050)2280000 Zagazig: building - Al Manshia - Moharam Bek Fax: (2050)2280099 Corner of Saad Zaghloul & Abdel Aziz - Alex Entrance- 21121-Alex Abaza St.- 44111- Zagazig Fakous: Tel: (203)3872000 Tel: (2055)2390000 Plot # 198 of 189 original -Al Baghdadi Fax: (203)3872099 Fax: (2055)2390099 Social Corporate (1) - Awlad El Adawy - Faqous – Responsibility Borg El- Arab: 47111-Sharkia Governorate Menouf: New Borg El Arab City - 23121- Alex Tel: (2055)3941956 2 El toomey St. off El Gheish St., - 32911 Tel: (203)4630100 Fax: 2055)3941956 - Menoufeya Governorate Fax: (203)4630199 Tel: (2048)3669303 Kafr El Sheikh: Fax: (2048)3669306 Fouad Street: 19 Ramezeya - Takseem El Moharbeen 39 El Horeya St.- El Attareen - 21131- El Kodmaa - Salah Salem Street – East Damietta: Alex City District - 33111- Kafr El Sheikh 67 Saad Zagloul St. Korniche El Nil
Tel: (203)4966890 Tel: (2047)3550000 - 34111- Damietta Management Risk Governance and and Governance Fax: (203)4966909 Fax: (2047)3550099 Tel: (2057)393500 Corporate Corporate Ibrahimia: Desouk: Damitta Port: 118 Port Said st. near Hehya street – El 68 El Geish street, Desouk City Investment Building - Damietta Port Ibrahimia - 21321 - Alex -33211- Kafr El Sheikh Governorate First Floor - 34516 - Damietta Tel: (203)5980400 Tel: (2047)2555902 Tel: (2057)2292406 Fax: (203)5980499 Fax: (2047)2555617 New Damietta: Mansheya: Lewaa Abdel Aziz St. : Plot #9 - Entertainment area - 2nd
2 Salah Salem St.- Near ElSenteral Saad Zaghloul St.- Abu Aisha Building neighborhood -34517-New Damietta Financial Separate St.- El Aatareen - El Mansheya - 21111- - 44111 - Zagazig Tel: (2057)2405762 Alex Tel: (2055)2390600 Fax: (2057)2405768 Statements Tel: (203)4881200 Fax: (2055)2390699 El-Ain El-Sokhna: Fax: (203)4881299 Meet Ghamr: (El Suez - El Sokhna - Hurghada) Kilo 46 Safia Zaghloul: 42 Port Said St.- Meet Ghamr – Abou Desert Road - Stella Di Mare Resort 33 Safia Zaghloul St.- 21131-Alex Aisha Tower - 35311 - Dakhleia Fence - 43552- Suez Tel: (203)4883000 Tel: (2050)4930000 Tel: (2062)3393600 Fax: (203)4883099 Fax: (2050)4930099 Fax: (2062)3393699 Sultan Hussein: Sadat City: El-Gomhoreya: Consolidated 58 El-Goumhoria St.- 42111- Port Said Statements 47 Al Sultan Hussien St.- 21131 - Alex Block 1 - Mehwar Khadamat – seventh Financial Tel: (203)4883100 District - Land No.1 - Center Services Tel: (2066)3390300 Fax: (203)4883199 - Ahmed Ismael St.- Front of Area Fax: (2066)3390399 No.11- Sadat City - 32897- Menofya MASA Al Alamain: El Canal - Ismailia: Tel: (2048)2625300 Commercial Mall “O” Masa Al-Alamain 141A Tahrir St.- 41111 - Ismailia Fax: (2048)2625399 – New Alamain City – 51718-Matrouh Tel: (2064)3923560 Governorate Shebeen El-Kom: Fax: (2046)3923552 Tel: 01201339077 21 Gamal Abd El Nasser St.- Saharf Branches Network Branches square - kawthar building - Shebyn el Delta & Suez Canal Region kom - 32111- Menofya Delta City Mall: Tel: (2048)2229416 42 El Geish St.- Borg Delta City Mall - Fax: (2048)2229395 31111 - Tanta Tel: (2040)3385200 Fax: (2040)3385299
QNB ALAHLI Annual Report 2020 — 195 Ismailia: Fayoum: Nabq Bay: Panorama Bldg., plot 1 - El mowa’f El 10 El Hourrya St.- Baher Youssef - Commercial part (RI) front of Oriental Gadid st.- corner el 20 St. with Shebeen 63111- El Fayuom Hotel Resort - Khalyg Nabq - 84111- El Kom St.- infront of Mogamaa El Tel: (2084)2390700 Hurghada Mahakem - 41111 - Ismalia Fax: (2084)2390799 Tel: (2069)3622050 Tel: (2064)3269000 Fax: (2069)3622055 Luxor: Fax: (2064)3269099 109 Ma’abad El Karnak St.- beside Sharm El-Sheikh: Port Said: Mubarak Library - 85111- Luxor El Salam Road - Khalyg Neama – 46619 Miami Building - 23 july St.- 42111 - Tel: (2095)2399100 - Sharm El Sheikh Port Said Fax: (2095)2399199 Tel: (2069)3622000 Tel: (2066)3390100 Fax: (2069)3622099 Menia: Fax: (2066)3390199 76 Takseem Shalaby - 61111 - Menia Specialized Corporate Shark El-Tafria Port: Tel: (2086)2386300 El Batal Ahmed Abdel Aziz: Shark El-Tafria Port - 42532 – Port Said Fax: (2086)2386399 54 Al Batal A. A. Aziz St.- Mohndeseen Tel: (2066)3390380 - 12311 - Giza Qena: Fax: (2066)3390389 Tel: (202)33324192 - (202)33324202 Building No. 9 - District No. 65 – 23 july Fax: (202)33324196 Teda: St.- 83111 - Qena Ain Sokhna - Industrial Economical Tel: (2096)3390600 Talaat Harb: Zone - Service Building - First Step - Fax: (2096)3390699 10 Talaat Harb - Ever Green Building - 43552- Suez Down Town - 11121- Cairo Sohag: Tel: (062)3597020 Tel: (202)27708002 46 Korniche El Nil St. Borg El Nil Kebly Fax: (062)3597021 Fax: (202)27708095 - 82111- Sohag EL-Shohadaa St - Suez: Tel: (2093)2380600 City Mall - 45,45 A EL-Shohadaa St.- Fax: (2093)2380699 43111 - Suez El-Dahar: Tel: (2062) 3471807 1 Hurghada Stadium Shops - El Nasr Fax: (2062) 3471806 Avenue - El Dahar - 84111 - Hurghada Suez: Tel: (2065)3562000 5 El Galaa St.- 43111- Suez Fax: (2065)3562099 Tel: (2062)3393300 El-Kawthar Hurgada: Fax: (2062)3393399 Banks Area - Block 8 - El-Kawthar zone Red Sea and Upper Egypt Region - 84111- Hurghada Assuit: Tel: (2065)3418700 2 Al Gomhoreya St.- El Watania Fax: (2065)3418799 Buildings - Building No. A- 71111- Grand Beach: Assuit Grand Beach Resort - 84111 - Hurghada Tel: (2088)2422500 Tel: (2065)3416100 Fax: (2088)2422599 Fax: (2065)3416199 Silicon Waha - New Assuit City: Hadabet Um El Sid: Unit (G3-G4 Commercial Building - Store No. 4 - Project of Madinat Elalaab Technology Zone - 71684 - New Assuit Elmaeya- Hadabet Um Elsid - 46619 - City Sharm El Sheikh Tel: (2088) 2035059 Tel: (2069)3622090 Fax: (2088) 2035063 Fax: (2069)3622095 Aswan Plaza: Hurghada Sheraton Road: Aswan Plaza Mall - Korniche El Nil St.- 36 North Mountain Road - 84111- Bandar Aswan- 81111 – Aswan City Hurghada Tel: (2097)2391000 Tel: (2065)3416500 Fax: (2097)2391099 Fax: (2065)3416599 Beni Suef: Hurghada City Center: 16 Port Said St.- Takseem El Houreya Unit #G031 ground level – Hurghada - 62111- Beni Suef City Center Mall - Cournich Road – El Tel: (2082)4494000 Dahar - 84111 – Hurghada Fax: (2082)4494099 Tel: (2065)3548391 Fax: (2065)3548384
196 — QNB ALAHLI Annual Report 2020 Overview Strategic Report Strategic Performance Operational Corporate Social Social Corporate Responsibility Risk Management Risk Governance and and Governance Corporate Corporate Separate Financial Separate Statements Consolidated Statements Financial Branches Network Branches
QNB ALAHLI Annual Report 2020 — 197